This Company Description is not a prospectus and has not been approved by the Swedish Financial Supervisory Authority (Sw. Finansinspektionen). For more information, see section “Important information”. Storytel AB (publ) Company Description regarding application for admission to trading of class B shares on Nasdaq First North in Stockholm

Important information about Nasdaq first north Nasdaq First North is an alternative marketplace operated by an exchange within the Nasdaq group. Companies on Nasdaq First North are not subject to the same rules as companies on the regulated main market. Instead they are subject to a less extensive set of rules and regulations adjusted to small growth companies. The risk in investing in a company on Nasdaq First North may therefore be higher than investing in a company on the main market. All companies with shares traded on Nasdaq First North have a Certified Adviser who monitors that the rules are followed.The exchange (Nasdaq Stockholm AB) approves the application for admission to trading. Her skal Kolunmetitel være 2 3 Important information

This company description (the “Company Description”) The class B shares in Storytel have not been and will has been prepared in connection with the application not be registered under the US Securities Act of 1933, for admission to trading of class B shares in Storytel AB as amended or under any relevant securities authority (publ) (“Storytel” or the “Company”) on Nasdaq First in any state or other jurisdiction in the United States North in Stockholm (“Nasdaq First North”). Nasdaq and may not be offered or sold within the United First North is a Multilateral Trading Facility (“MTF”), States. Furthermore, the aforementioned authorities an alternative marketplace operated by an exchange have not confirmed the accuracy or determined the within the Nasdaq group, and is not subject to the same adequacy of the Company Description. Any represen- rules as companies on the regulated main market. In tation to the contrary is a criminal offense in the United the Company Description the “Storytel Group” or the States. The Company Description does not constitute “Group” means the company group in which Storytel an offer to sell, or an invitation to offer to buy, class is the parent company, and “Group Companies” refers B shares in any jurisdiction where such an offering is to one or several subsidiaries in the Group. “Norstedts” unlawful. refers to Norstedts Förlagsgrupp AB, a subsidiary to Storytel within the Print Publishing division of the Forward-looking statements Group. The Company Description contains certain for- The Company Description has only been prepared in ward-looking statements that reflect Storytel’s views connection with the application for listing of Storytel’s with respect to future events and financial and op- class B shares on Nasdaq First North and does not con- erational performance. Such words as “intends,” “as- tain any offering of shares or any other offering of fi- sesses,” “expects,” “can,” “plans,” “estimates” and nancial instruments in the Company in Sweden or in other expressions that relate to indications or pre- any other jurisdiction. dictions concerning future development or trends and that are not based on historical facts constitute No measures have been or will be taken in any other forward-looking statements. Forward-looking state- jurisdiction than Sweden that would allow the posses- ments are, by nature, associated with known as well sion and distribution of the Company Description or as unknown risks and uncertainties, given their depen- any other documents pertaining to the Company dence on future events and circumstances. Forward- Description. Applications to acquire shares that vio- looking statements are no guarantee of future results late such rules may be deemed invalid. Persons who or trends, and the actual results could differ mate- come into possession of the Company Description are rially from those contained in the forward-looking requested by the Company to inform themselves statements. Factors that could result in Storytel’s ac- about and to observe such restrictions and shall not tual earnings and performance deviating from the con- publish or distribute the Company Description in vio- tent of the forward-looking statements include, but lation of applicable laws and regulations. The Company are not limited to, the descriptions in the section “Risk does not accept any legal responsibility for any viola- factors”. Forward-looking statements in the Company tion by any person, whether or not a prospective in- Description apply only as of the date of publication of vestor, of any such restrictions. the Company Description. Storytel does not give any undertaking that the Company will disclose any up- Storytel’s class B shares are as per the date of the dates or revisions of forward-looking statements due Company Description admitted for trading on Spotlight to new information, future events or other such mat- Stock Market. The last day of trading on Spotlight ters above and beyond what is required according to Stock Market is planned to be on 4 December 2018 applicable laws. and the first day of trading on Nasdaq First North is planned to be on 5 December 2018. Storytel’s class B Industry and market information shares are as per the date of the Company Description traded under the ticker STORY B and will continue to The Company Description contains information about be traded under the ticker STORY B once the class B the Storytel Group’s geographic markets and prod- shares have been admitted to trading on Nasdaq First ucts, market size, market shares, market position and North. The Company’s current shareholders do not other information concerning Storytel’s operations have to take any measures in connection with the list- and markets. Unless stated otherwise, such informa- ing change. tion is based on the Company’s assessment of sev-

Important information 4 Presentation of financial information eral different sources, including statistics and infor- mation from external industry or market reports, All financial amounts are presented in Swedish krona market surveys, publicly available information and (“SEK”), unless otherwise indicated. “SEK thousand” commercial publications. Information from third refers to thousands of Swedish kronor and “SEK mil- parties has been accurately reproduced, and as far lion” refers to millions of Swedish kronor. “EUR” re- as Storytel is aware and can ascertain by compar- fers to euro and “EUR million” refers to millions of isons with other information published by the rel- euros. Certain financial information and other infor- evant third parties, no information has otherwise mation presented in the Company Description have been omitted that could render the reproduced in- been rounded to make the information easily com- formation inaccurate or misleading. Industry and prehensible to the reader. Accordingly, the figures market publications generally state that the infor- contained in certain columns may not tally with the mation reproduced therein has been obtained from total amount specified. sources adjudged to be reliable, but the accuracy and completeness of such information is not guar- Nasdaq First North anteed. Because the information has not been ver- ified by the Company, the Company cannot guar- Nasdaq First North is an alternative marketplace antee the correctness of the market information operated by the different exchanges within the contained in the Company Description, or that it Nasdaq Group. Companies on Nasdaq First North has been collected or derived from these publica- are not subject to the same rules as companies listed tions. The Company does not assume responsibil- on the regulated main market. Instead they are sub- ity for the correctness of any industry or market ject to a less extensive set of rules and regulations information included in the Company Description adjusted to small growth companies. The risk in in- that has been provided by third parties. Market in- vesting in a company on Nasdaq First North may formation and market statistics, by nature, are -for therefore be higher than investing in a company on ward looking and subject to uncertainty, could be the main market. All companies with shares traded interpreted subjectively and are not necessarily re- on Nasdaq First North have a Certified Adviser that flective of actual or future market conditions. Such monitors that the rules are followed. The exchange information and statistics are based on market -sur (Nasdaq Stockholm AB) approves the application veys, which, in turn, are based on selection and sub- for admission to trading. jective interpretations and assessments, including assessments about the type of products and trans- actions that should be included in the relevant mar- ket, with respect to both those who perform the sur- veys and the particular respondents. Accordingly, potential investors should be aware that thefi- nancial information, market information, forecasts and estimated market information contained in the Company Description do not necessarily constitute reliable indicators of Storytel’s future results.

The contents of the Company’s website, the web- site of any Group Companies or any third-party websites referred to herein do not constitute part of the Company Description.

Important information Table of Contents

1. Risk factors...... 7 2. This is Storytel...... 16 3. Background and reasons...... 17 4. Market overview...... 18 5. The Storytel Group...... 26 6. Message from the CEO...... 44 7. Financial overview...... 46 8. Board of directors, executive management and auditor...... 57 9. Corporate governance...... 71 10. Share capital and ownership structure...... 75 11. Articles of association...... 78 12. Legal considerations and supplementary information...... 80 13. Tax considerations in Sweden...... 86 14. Addresses...... 88

Her skal Kolunmetitel være 6

PRELIMINARY TIMETABLE

Last day of trading on Spotlight Stock Market 4 December 2018

First day of trading on Nasdaq First North 5 December 2018

MISCELLANEOUS

ISIN-code SE0007439443

Ticker on Spotlight Stock Market STORY B

Ticker on Nasdaq First North STORY B

FINANCIAL CALENDAR

Year-end report 2018 25 February 2019

Annual Report 15 April 2019

Annual General Meeting 15 May 2019

Q1 report 14 May 2019

Q2 report 13 August 2019

Q3 report 12 November 2019

Preliminary timetable 7 1. Risk factors

An investment in the shares of Storytel is associated strategy. The Group has and may in the future ac- with various risks. A number of factors influence, or quire companies to supplement the Group’s cur- can influence, Storytel’s operations, both directly and rent product portfolio or to gain access to new indirectly. A number of risk factors and circumstances markets. There is a risk that the Company will be of major importance, which are regarded as material unable to find suitable candidates for acquisition, to Storytel’s operations and future development, are that the Company will be unable to complete ac- described below in no particular order of importance quisitions on acceptable terms and conditions, or or claim to be exhaustive. The risks described below at all, or that new acquisitions fail to bear the ac- are not the only risks to which the Company or its quisition costs. There is also a risk that acquisitions shareholders may be exposed. There are other risks may be regarded by the financial market or inves- that are currently unknown to the Company or that tors as something negative, for example if the con- the Company currently does not regard as significant sideration is deemed too high or if the acquisition but that could also have an adverse impact on is not considered to be in line with the Company’s Storytel’s operations, financial position or operating overall strategy, which in turn may affect Storytel’s profit. If any of the risks described below, or another share price. The terms and conditions for any fu- risk of which Storytel is not aware, actually were to oc- ture acquisitions may also involve mechanisms cur, the Company’s business operations, financial po- for additional payments (so called earn-outs), and sition and earnings could be materially adversely thus, the Company may be obligated to make such affected. This could also result in the price of the payments in the years following the acquisition. All shares of Storytel declining significantly and in an in- acquisitions go through a thorough due diligence vestor losing his/her investment in part or in full. The process, however there is a risk that adverse ef- Company Description contains forward-looking state- fects arise due to items or risks not identified in the ments that could be affected by future events, risks due diligence process, which could have adverse fi- and uncertainties. The Company’s actual earnings nancial, legal and reputational effects on Storytel. could differ significantly from the earnings anticipated in the forward-looking statements due to many fac- In addition, any and all acquisitions carried out by tors, including but not limited to the risks described Storytel could lead to difficulties in integrating op- below and in other parts of the Company Description. erations and staff from acquired companies and in In addition to this section, investors should also take retaining and motivating key employees from ac- into account other information in the Company quired companies. Acquisitions and integration of Description. operations could disrupt Storytel’s current busi- ness activities, entail obligations and liabilities held Risks related to the Company and its by the acquired business and increase Storytel’s industry expenses. Furthermore, future acquisitions could reduce Storytel’s cash and cash equivalents and Storytel’s growth strategy includes acquisitions, increase its indebtedness, and any of these risks which come with risks and the Company may fail could materially and adversely affect Storytel’s op- to successfully integrate acquired businesses erations, financial position and/or earnings.

The Company’s strategy involves both organic Storytel’s ability to handle growth may prove to growth and growth through acquisitions. Storytel be insufficient and Storytel’s growth and scaling continuously evaluates potential strategic acquisi- plans may not materialise tion targets to support the Company’s long-term

1. Risk factors 8

Storytel’s operations and number of employees Sweden, Denmark, Norway, Finland, Iceland, the have grown substantially since its incorporation. Netherlands, Russia, Poland, Italy, Spain, Turkey, Potential investors should not necessarily take India, UAE, Mexico, Bulgaria, Singapore and Brazil. historical growth as an indication of future devel- Storytel is undergoing rapid growth to expand to opments. Earlier growth has exposed, and future new markets around the world. Consequently, growth will expose, the Company, its executive Storytel is exposed to various risks related to oper- management, administration, IT system as well as ating in a global environment, such as implementa- operational and financial infrastructure to several tion of new, or changes in existing, legislation, rules challenges. The board of directors and manage- or regulations. Trade restrictions introduced by ment of Storytel have ambitious growth and scal- governments or authorities in the countries where ing plans for the Storytel Group and the intention Storytel operates, or in other countries where is, in coming years, to further expand the opera- Storytel may operate in the future, as well as sanc- tions to or within, but not limited to countries in, tions or other measures by associations and organ- Europe, Asia and Latin America. To grow and scale isations such as the EU and UN, may restrict the in an appropriate manner and in accordance with Company’s operations, delay or prevent planned in- Storytel’s growth and scaling plans, there will be vestments or otherwise adversely affect Storytel’s high demands on Storytel’s organisation, as well financial results. Storytel’s business is also subject as on its operational and financial infrastructure. to risks inherent in its business activities, such as: Internal processes must be carefully prepared and continuously evaluated and if necessary, amended. • Recessionary trends, inflation or instability in local markets; Expansion to jurisdictions where Storytel has no • Differences and unexpected changes in presence as of the date of the Company Description regulatory environments, including may expose the Company to risks that Storytel is environmental, health and safety, detailed currently unfamiliar with (for example stricter laws, development plans and labour laws; trade sanctions, consumer law and regulations that • The introduction or application of more regard product liability, the existence of corruption, stringent product norms and standards and and macroeconomic risks specific to each jurisdic- associated costs; tion). There is a risk that the Company may not con- • Exposure to different legal standards and sider every relevant risk that is associated with ex- enforcement mechanisms and the cost of pansion to a new jurisdiction or that it is unable to compliance with those standards; address known risks. When the Group expands its • Being subject to multiple taxation regimes, operations, it has to hire employees with the right including regulations relating to transfer level of knowledge of the Company’s markets, in- pricing and tax deductions on remittance and dustry and operations and there is a risk that such other payments by or to subsidiaries; employees are not available to the Company. • Being subject to various, and potentially overlapping, regulations and rules, If the Company fails to handle growth and scaling, particularly those relating to export and including hiring competent employees or if internal import controls, anti-corruption and processes do not address the legal and financial anti-bribery; risks associated with expansion, it could lead to the • Lack of payment solutions feasible for Company having to cancel or reduce its growth Storytel’s business model leading to plans and/or pace of expansion, which could have a difficulties collecting the subscription fee material and adverse impact on the Company’s op- from customers; erations, financial position and/or earnings. • Customs duties, charges, export controls, import restrictions and other trade barriers; The market for Storytel’s services and products is • Changes in pricing restrictions; global and operating in a global environment may • Foreign exchange control and restriction on expose the Company to risks such as political un- repatriation factors of funds; and certainties, local business risks and laws, rules and • Political and social unrest and instability, regulations in many countries including but not limited to freedom of speech issues. Storytel operates in a global environment and has or is in preparation of launching its service, as of There is a risk that Storytel fails to develop and im- the date of the Company Description, in plement systems, policies and practices to com- pletely manage these risks or comply with applica-

1. Risk factors 9

ble regulations without incurring substantial costs. not be renewed indefinitely or that such agreements Any of these factors could lead to delays in the re- will not be renewed at all. The terms of these agree- lease and sale of products and services and pro- ments, including the royalty rates that Storytel is re- vide time for competing technologies to develop quired to pay pursuant to them, may change as a re- and reputational damage, which may result in loss sult of changes in the Company’s bargaining power, of revenue and profitability for Storytel. The mate- changes in the industry, changes in the law, or for rialisation of any of these risks could have a mate- other reasons. Increases in royalty rates or changes rial adverse effect on Storytel’s business, financial to other terms of these agreements may materially position and/or earnings. impact Storytel’s business, operating results, and fi- nancial condition. If such agreements cannot be re- The Company operates in a fast-growing and newed at all it could decrease the Company’s of- competitive market fering on certain markets and the overall offering of digital titles. That may lead to a decreased use Storytel offers services to consumers relating to and demand for the Company’s products and ser- the streaming of audiobooks and e-books as well as vices, which could have a material adverse effect publishing of books through publishing companies on the Company’s business, financial position and/ in the Group. There are a number of competitors or earnings. who develop and offer competing products and ser- vices in the market addressed by the Group. There The Company is dependent on being innovative is a risk that these, or completely new competitors, and adapting to technological advances and sub- could develop new technologies and launch prod- scriber preferences and demands ucts and services that offer a better price and/or per- formance than the Group’s products and services Storytel competes with providers of on-demand and thereby take market shares from the Company. audiobooks and e-books that are made available on Additionally, in the future, Storytel may also en- mobile devices and in-home environments. Many, counter competition from other large, well-estab- if not all, of the markets in which Storytel operates lished and well-financed entities that could develop or could operate in the future are characterised by their own solutions, or acquire, invest in or form rapid technological development. The rapid techno- joint ventures with providers of products/technol- logical development could also lead to a decreased ogy that are similar to or competes with Storytel’s demand for Storytel’s print publishing products. products and services. Competitors to Storytel Consequently, Storytel’s ability to predict techni- may adopt an aggressive price strategy to capture cal advances, market needs, subscriber preferences early market shares. Increasing competition may re- and demands and to adapt its products and services sult in increased price pressure, lower profit mar- accordingly is critical for the continued success of gins, increased R&D costs, and/or increased mar- the Company and the Group as a whole. There is keting and sales costs. Storytel is also exposed to a risk that Storytel could misjudge these develop- the risk that its vendors or collaboration partners ments. If Storytel’s product development fails to themselves develop technologies, products or ser- keep up with the rate of development in these mar- vices that partly or fully resolve the same needs that kets and the available technology, this could have a Storytel’s offering resolves, which would reduce the material adverse effect on the Company’s business, need for the Company’s offer. This could have a ma- financial position and/or earnings. terial adverse effect on the Company’s business, fi- nancial position and/or earnings. Streaming depends on effectively working with third-party platforms, operating systems, online Storytel is dependent upon third-party platforms, hardware, networks, regulations, and digital publishers standards that Storytel does not control

In order for Storytel to secure the rights to stream Storytel’s services require high-bandwidth data ca- and distribute primarily audiobooks and e-books, pabilities. If the costs of data usage increase or ac- Storytel has entered into agreements with third- cess to data networks is limited, the Company’s party digital publishing companies. As remunera- business may be seriously harmed. Additionally, to tion, Storytel pays royalties to such parties. There deliver high-quality audio and other content over is no guarantee that these agreements will continue networks, Storytel’s services must work well with to be available in the future at rates and on terms a range of technologies, systems, networks, regu- that are favourable or commercially reasonable. lations, and standards that the Company does not Moreover, there is a risk that such agreements will control. In addition, the adoption of any laws or reg-

1. Risk factors 10

ulations that adversely affect the growth, popular- telecommunications failures, and similar events. ity, or use of the Internet, including laws governing They also are subject to break-ins, sabotage, inten- Internet neutrality, could decrease the demand for tional acts of vandalism, the failure or lack of phys- the Company’s services and increase Storytel’s cost ical, administrative, technical and cyber security of doing business. measures, or occurrence of terrorist acts, natural di- sasters, human error, financial insolvency of third Storytel has designed its software and technologi- parties that Storytel work with, and other unantici- cal platform to utilise data processing, storage capa- pated problems or events. The occurrence of any of bilities, and other services where hosting is mainly these events could result in interruptions in the provided by Google Cloud Platform (“GCP”) or Company’s services and unauthorised access to, or what is commonly referred to as cloud computing. alteration of, the content and data contained in Storytel cannot easily switch its GCP operations to Storytel’s systems and that these third parties store another cloud provider, and any disruption of, or in- and deliver on the Company’s behalf. terference with, the use of GCP could have a mate- rial adverse effect on the Company’s business, op- Any disruption in the services provided by these erating results and/or financial condition. third parties could materially adversely impact Storytel’s business reputation, customer relations, Storytel is dependent on a third-party book and operating results. Upon expiration or termina- printing company tion of any of the Company’s agreements with third parties, Storytel may not be able to replace the ser- Storytel, through Norstedts, currently has an agree- vices provided to the Company in a timely manner ment with a printing company in Latvia for the print- or on terms and conditions, including service levels ing of books. The printing company could in the fu- and cost, that are favourable to the Company, and ture experience periodic service interruptions and a transition from one third party to another could delays involving its printing and distribution, due to subject the Company to operational delays and in- damage from earthquakes, floods, fires, power loss efficiencies until the transition is complete, which and similar events. It might also be subject to break- could have a material adverse effect on the ins, sabotage, intentional acts of vandalism, the fail- Company’s business, financial position and/or earn- ure or lack of physical, administrative, technical and ings. cyber security measures, or occurrence of terrorist acts, natural disasters, human error and financial in- The Company is dependent on functional solvency. The occurrence of any of these events and secure payment solutions could result in delays in delivery of the Company’s books, that the Company will not be able to deliver Storytel accepts payments through various payment books at all and/or costs for replacing the printing solution providers, such as payment with credit company, which could have an impact on the cards and iDeal NL bank transfers. The Company Company’s business reputation, customer relations has plans to provide further payment solution op- and operating results. These risks could have a tions in the future. Furthermore, Storytel uses a short-term material adverse effect on the Company’s payment platform from Adyen N.V. (formerly Adyen business, financial position and/or earnings. B.V.”) (“Adyen”), which can handle different payment solutions. The services provided by Adyen includes, Storytel is exposed to certain risks attributable to inter alia, handling of transactions between Storytel the Company’s IT systems and its subscribers for monthly subscription pay- ments and handling of settlement of the transac- Storytel relies on systems housed in the Company’s tions with the credit card companies and the sub- own facilities and upon third parties, including scribers’ banks. These payment solution providers bandwidth providers and third-party “cloud” data provide services to the Company in exchange for a storage services, to enable Storytel’s subscribers to fee, which may be subject to change. Furthermore, receive the Company’s content in a dependable, the Company relies on their accurate and timely re- timely and efficient manner. Storytel has experi- ports on sales and redemptions. If such accurate enced and may in the future experience periodic and timely reports are not being provided, it will af- service interruptions and delays involving its own fect the accuracy of the Company’s reports to licen- systems and those of third parties that the Company sors, and also affect the accuracy of the Company’s works with. Both Storytel’s own facilities and those financial reporting. These inaccuracies could have a of third parties are vulnerable to damage or inter- material adverse effect on the Company’s business, ruption from earthquakes, floods, fires, power loss, financial position and/or earnings.

1. Risk factors 11

The Group’s handling of personal data have a material and adverse impact on Storytel’s op- erations, financial position and/or earnings. A new Data Protection Law, the General Data Further, as more and more companies are being Protection Regulation (EU 2016/679) (the ”GDPR”), targeted with sophisticated attacks by hackers, the has been adopted in the EU and came into full force Group could also be held accountable if third-par- and effect as of 25 May 2018. The GDPR applies ties were to breach the Group’s network security, immediately throughout the EU and has (as regards including breaches from the employees or consul- Sweden) replaced the Swedish Personal Data Act as tants of the Group. This could also entail specifi- regards the handling of personal data. It is still un- cations related to other improper use of personal certain precisely how the authorities in the coun- data, including unauthorised marketing. The Group tries where Storytel operates will interpret and ap- could also be held accountable for storing incorrect ply the regulations. The GDPR contains principles information or for flaws in their integrity and data that existed in the Swedish Personal Data Act (which protection routines. Liability for misuse of personal was driven by the then existing EU Data Protection data or inadequate routines or systems for process- Directive 95/46/EG), but there are additional new ing such information could adversely impact the or amended provisions and principles. The GDPR Company’s earnings. Furthermore, failure to com- also contains more stringent sanctions for failure ply with data protection laws or security breaches to comply with its rules. Among other things, the relating to personal data could damage Storytel’s supervisory authority is given the right to impose reputation and cause the Group to be liable for dam- administrative fines of up to EUR 20 million, or ages, fines or other legal remedies, thereby resulting four percent of a company’s annual global turnover in increased costs and/or a loss of income. For ex- (whichever is higher), if certain rules are breached. ample, it could entail significant costs for the Group in order to investigate and manage breaches and As part of its business operations, the Group col- any subsequent consequences related thereto. The lects and processes large amounts of personal data Company could also sustain damage to its reputa- on a daily basis. In anticipation of the new EU data tion and/or the value of its brands could decline. If privacy regulation, Storytel has conducted GAP any of the above risks were to materialise, this could analysis and implemented organisational, technical have a material and adverse impact on the Group’s and administrative measures including but not lim- operations, financial position and/or earnings. ited to the roll out of new terms and conditions and a privacy policy for subscribers on all, at the time, Storytel is dependent on key individuals existing markets and there has been an internal im- plementation of Storytel’s privacy policy for employ- Storytel’s future success is highly dependent on the ees. Moreover, Storytel has updated employment talents and contributions of its executive manage- terms and introduced a new awareness training pro- ment, members of the Company’s executive team, gram. Storytel’s measures to maintain the secrecy and other key employees, such as key developers, and integrity of personal data and protected infor- finance, research and development, marketing, and mation as well as the justification and lawfulness of publishing personnel. Storytel’s future success de- the personal data processing could prove to be in- pends on the Company’s continuing ability to at- sufficient and it is therefore a risk for unlawful -in tract, develop, motivate, and retain highly qualified fringement or that personal data or protected in- and skilled employees. All of the employees, includ- formation are being disclosed or processed in a way ing the executive management, are free to termi- not compliant with the GDPR or applicable legisla- nate their employment relationship with Storytel tion in other jurisdictions in which Storytel operates at any time, and their knowledge of the Company’s or will operate. Besides the GDPR, the Group is also business and industry may be difficult to replace. subject to other data processing regulations in the Qualified individuals are in high demand, particu- non-EU countries in which it operates. Such regu- larly in the digital media industry, and Storytel may lations may entail stricter or different requirements incur significant costs to attract them. If the Group for the Group’s handling of personal data. Any fail- is unable to attract and retain the Company’s exec- ure to comply with the GDPR or other data process- utive management and key employees, the Group ing regulations could subject the Company to litiga- may not be able to achieve its strategic objectives, tion, civil or criminal penalties and adverse publicity and its business could be harmed. Thus, loss of key as well as limitation of use of personal data required employees or failure to attract new employees could for the business as currently conducted that could have a material adverse effect on Storytel’s opera- tions, financial position and/or earnings.

1. Risk factors 12

Intellectual property rights therefore have a material impact on the Company’s reputation or financial result. Storytel deems that the importance of intellectual If the Company’s actions to protect its intellectual property will increase with Storytel’s growth strat- property rights as well as preserving the secrecy of egy and expected expansion to new jurisdictions, as trade secrets and confidential information are in- well as the potential wider acceptance of Storytel’s sufficient, or if the Company fails to prevent others service among customers and other stakeholders. from obtaining such rights or information, it may The existence of, and activities by, Storytel’s exist- have a material adverse impact on Storytel’s busi- ing or future competitors is also expected to em- ness, financial position and/or earnings. phasise the importance of having adequate protec- tion in terms of intellectual property rights and Regulations on online consumer services trade secrets. As of the date of the Company Description, the Group has no registered patents, There are currently few laws or regulations that are however Storytel is the registered holder of 55 directly applicable to online consumer services. The trademarks. E-Commerce Directive 2000/31/EC which came into force in January 2002 is intended to enable fi- There is a risk that Storytel will not be able to pro- nancial services providers to sell financial services tect material parts of its products and/or technol- throughout Europe without many of the legal hin- ogy with intellectual property rights, especially drances existing at that time. New laws and regula- considering the expected increasing competitive tions could be introduced in areas such as privacy environment in Storytel’s markets. Further, third protection, pricing, taxation, content, copyright, parties may object approval of intellectual prop- publishing, competition-impeding issues, and prod- erty rights and such objections from third parties uct and service quality. For example, the European may also concern already approved registrable in- Council has published two new EU regulations and tellectual property rights. There is also a risk that one directive aiming at facilitating the collection of the costs of defending intellectual property will value added tax (VAT) when consumers buy goods be too high for the Company to justify maintain- and services online. The member states will have ing its rights to such intellectual property. If piracy until 31 December 2018 and 31 December 2020 increases and becomes widespread in the audio- to transpose the corresponding provisions of the di- books and e-books market in the future, there is a rective into national laws and regulations. The regu- risk that Storytel’s intellectual property rights can- lation on administrative cooperation will apply from not be protected; that may lead to increased costs 1 January 2021. The interpretation of the EU rules for protection against piracy activities and disputes could lead to changes of VAT on electronic services in relation to piracy investigations/criminal trials, and distance sales of goods in markets where the reputational damage and a decreased demand for Company operates. The rapid growth in e-com- the products and services provided by Storytel. merce can also lead to stricter consumer protec- tion laws. The introduction of new laws and regu- Intellectual property rights held by third parties may lations for online-based business operations could prevent Storytel from using a certain technology, restrict the growth of e-commerce, and harm the product or design. Consequently, Storytel is ex- Company’s operations, both directly and indirectly. posed to the risk of having to license the user rights There is a risk, due to the cross-border nature of to such technology, product or design, which may the Internet, that other countries could attempt to be costly and associated with restriction in the use regulate the content on the Company’s services, of the same. However, no assurance can be given or alternatively, could consider its laws to apply on as to the possibility to license such rights at all, or the Company’s services and impose fines on the at commercial terms acceptable to the Company. Company or sue the Company for breach of its lo- Storytel’s business, both the streaming and print cal laws. Further, new laws and regulations could be publishing side, is highly dependent upon intellec- introduced in jurisdictions where the Group is cur- tual property rights held by third parties, namely rently operating that may impose restrictions on the writers and/or publishers. Hence, the licensing and use and distribution of content in the Company’s acquisition of the rights to third party content are services, which could have a material adverse im- core to Storytel’s business. Failure to acquire or re- pact on the Company’s operations, financial posi- tain third party intellectual property rights could tion and earnings.

1. Risk factors 13

Storytel could be unsuccessful in maintaining and erty, litigation or regulatory activity, government strengthening its brand surveillance, the actions of Storytel’s advertisers, the actions of the Company developers whose ser- Storytel’s success is partly dependent on it main- vices are integrated with Storytel’s services, the use taining a strong brand. The Company believes that of the Company’s services for illicit, objectionable, it has an established, trusted and recognised brand or illegal ends, the actions of Storytel’s subscribers, in conjunction with a good reputation in the digital the quality and integrity of content shared on books market. The Company’s brand comprises a Storytel’s services, or the actions of other compa- competitive advantage regarding the development nies that provide similar services to the Company, of new and existing customer relationships. The could materially adversely affect the Company’s future success of the Company will depend on its reputation. Such negative publicity could also have ability to maintain and enhance the strength of the an adverse effect on the size, engagement, and loy- brand. There is a risk that the Company’s efforts, or alty of the Company’s subscriber base. In relation to any of its other initiatives to maintain and enhance both digital and print publishing, negative publicity the strength of the brand, may fail or that the brand for the Company could lead to current and poten- is damaged due to actions taken by third parties tial new authors not wanting to cooperate, renew that negatively affect the Group. If the Company their current agreements and publish their titles is unable to maintain or enhance the strength of with the Group. The materialisation of any of these the Group’s brand, then the Company’s ability to re- risks could result in both damaged reputation and tain or expand its subscriber base may be impaired, decreased revenue, which could materially ad- and it could have a material adverse impact on the versely affect the Company’s business, operating Group’s operations, financial position and/or earn- results and/or financial condition. ings. Storytel may become involved in legal disputes Storytel needs to attract new subscribers and retain existing subscribers Storytel is a commercial company that operates in an international market and could become involved The Company’s ability to attract new subscribers in disputes within the framework of normal busi- and retain existing subscribers depends in large part ness activities and risk being subjected to claims in on the Company’s ability to continue to offer lead- legal processes regarding agreements and due to vi- ing technologies and services, compelling content, olation of regulatory requirements and/or other le- superior functionality, and an engaging user expe- gal violations. rience. As consumer tastes and preferences change on the Internet and with mobile devices and other In general, disputes, claims and investigations could internet-connected products, Storytel may need to be time-consuming, interrupt normal business ac- enhance and improve its existing services, intro- tivities, entail substantial damages, lead to consid- duce new services and features and offer books, au- erable costs and/or require the executive manage- diobooks, e-books or other digital content that are ment’s attention, which may disturb day-to-day in the interest of current and future subscribers. If operations. Moreover, potential disputes may be Storytel fails to offer a compelling service and state- settled applying laws of countries which Storytel is of-the-art delivery platforms to meet consumer de- unfamiliar with and it may be difficult to predict the mands, the Company’s ability to grow or sustain the outcome of complex disputes, claims and investiga- reach of its services, attract and retain subscribers tions. Future disputes, claims and investigations may be adversely affected. If the Company cannot could have a material adverse impact on Storytel’s attract and retain subscribers, it will have a material operations, financial position, earnings and/or rep- adverse effect on the Company’s business, financial utation. position and/or earnings. Storytel’s insurance coverage could prove to be Negative media coverage could adversely affect inadequate for protecting the Company against Storytel’s business losses and/or the liability that may arise pursuant to its operations Storytel receives a high degree of media coverage around the world. Unfavourable publicity regard- As of the date of the Company Description, Storytel ing, for example, payments to publishers, writers, holds the following main insurances, on a global and other copyright owners, the Company’s privacy level: practices, terms of service, service changes, service quality, handling or licensing of intellectual prop-

1. Risk factors 14

• property damage and business interruption There is a risk that the tax authorities in the relevant insurance covering for loss of property countries could arrive at decisions that differ from damages and business interruption; the interpretation made by the Company. The tax • general liability and product liability insurance authorities could have a different opinion than the protecting against claims from third parties; Company, particularly regarding transactions be- • media liability insurance protecting against tween Group Companies in different countries (so- negligence in the Company’s own media called transfer pricing issues). If these risks were to content; materialise, they could materially and adversely im- • legal aid insurance covering legal fees in pact the Group’s operations, outlook, earnings and civil trials; financial position and lead to retroactive changes in • crime insurance covering the Company the Company’s tax returns. against losses arising from criminal acts; • director and officer insurance protection for The Group has partially grown through acquisitions. costs associated with litigation resulting from Acquisitions generally entail exposure to both cur- errors made by directors and officers for rent and future tax positions in relation to the ob- which they are liable; and ject of the acquisition, which could materially and • business travel insurance giving protection adversely impact the Group’s operations, outlook, for employees when travelling within earnings and financial position. If these risks were their work. to materialise, they could materially and adversely impact the Group’s operations, outlook, earnings There is a risk that the scope of the Company’s in- and/or financial position. surance coverage could prove to be insufficient or inapplicable in the event of damages or claims for li- Storytel may need to raise additional capital in the ability. If these risks were to materialise, it could ma- future, which may not be available at reasonable terially and adversely impact Storytel’s operations, terms or at all financial position and/or earnings. There is a risk that the Company will not have suf- The Company is exposed to interest rate risks ficient incomes in order to finance its operations, and Storytel may thus be forced to raise capital by Interest rate risk refers to the risk that financial in- way of, for example, private placements, share is- come and expenses as well as the value of financial sues with preferential rights for existing sharehold- instruments could fluctuate due to changes in mar- ers, bank loans or other external financing alterna- ket rates. Interest rate risks could lead to changes tives. The Company’s ability to raise such capital will in market values and cash flow as well as fluctua- be affected by a number of factors, some of which tions in the Group’s profit. The Company is exposed are outside the Company’s control, and includes: to interest rate risks, primarily through its non-cur- (i) the general market condition and the availability rent loans with variable interest rates. of capital; (ii) the Company’s credit rating; and (iii) disturbances and/or insecurity on the capital and The Company is exposed to tax risks credit markets. Considering the Company’s cur- rent financial position, there is a risk that Storytel The Company conducts its operations, calculates its will not be able to raise capital at terms available taxes and determines the scope of deferred tax as- for financially stronger companies in the industry. sets in the accounts in accordance with its interpre- Investors should observe that there is a risk that tation of current tax laws in Sweden, and in other capital cannot be raised at all. If Storytel is unable countries where the Group operates. Storytel fre- to raise capital at attractive terms, or at all, it could quently obtains advice from tax experts to under- lead to: increasing costs, the Company losing mar- stand changes in tax systems and mitigate tax risks. ket shares, not being able to realise the Company’s Nevertheless, there is a risk that the Company’s in- growth strategy and forcing the Company’s board terpretation and application of current laws, regu- of directors and executive management to revise lations, legislative provisions based on court prac- the existing business plan and growth strategy. If tices and relevant tax authorities’ administrative these risks were to materialise, it could have a ma- practices have not been or will not be correct in terial adverse impact on the Company’s operations, the future or that such laws, regulations, legislative financial position, earnings and/or ultimately bank- provisions or practices will be amended, possibly ruptcy. with retroactive effect.

1. Risk factors 15

The Company is exposed to currency no obligation to pay dividends. Accordingly, all po- exchange risks tential future dividends that Storytel could pay will depend on a number of factors, such as future in- Currency risk refers to the risk of exchange rate come, financial position, cash flow, working capi- fluctuations having adverse effects on Storytel’s tal requirements, cost of investments and other income statement, balance sheet or cash flow. factors. There is a risk that Storytel will not have Storytel prepares its financial statements in SEK sufficient distributable funds and Storytel’s share- and SEK is the Group’s functional currency. Foreign holders may decide not to approve payment of div- exchange exposure occurs in conjunction with idends in the future. products and services being bought or sold in cur- rencies other than the respective subsidiary’s local Differences in currency exchange rates could currency (transaction exposure) and during conver- adversely affect the value of shareholdings or sion of the balance sheets and income statements dividends of non-Swedish subsidiaries into SEK (translation exposure). Storytel’s global operations give rise to The Company’s shares will be listed only in SEK and cash flows in currencies other than SEK. Storytel potential dividends will be paid in SEK. This means is primarily exposed to changes in EUR/NOK/DKK that shareholders whose principal currency is not in relation to SEK. Accordingly, any substantial -ex SEK will experience a negative effect on the value change rate fluctuations could have a material ad- of their shareholdings and dividends when they are verse effect on the Company’s business, financial converted to other currencies if SEK decreases in position and/or earnings. value against their principal currency.

Risks related to the Company’s An active, liquid and functioning market for shares trading in the Company’s shares may not emerge

The sale of shares by existing shareholders, or the Prior to the listing change, Storytel’s shares are perception that such sales could occur, could re- traded on Spotlight Stock Market. There is a risk duce the market price of the shares that an active, liquid trading market will not develop after the listing change to Nasdaq First North. There The market price of Storytel’s shares could de- is a risk that upswings and downturns will occur cline in the event of substantial sales of shares in with regards to prices and volumes, that have no re- the Company, particularly sales by the Company’s lation to, or that is disproportionate in relation to, board members, senior executives and major share- the Company’s earnings and that are beyond the holders, or if a large number of shares are sold within Company’s control. General economic and indus- a short period of time. trial factors could have a material impact on the price of the Company’s shares, regardless of its ac- Dividend risk tual earnings. These fluctuations could be even more pronounced in share trading shortly after the As of the date of the Company Description and since listing change. Storytel became a listed company, Storytel has not paid any dividends and the Company’s board of di- Future issues of shares or other securities in the rectors have not adopted a dividend policy. In ac- Company could dilute shareholdings and affect cordance with the Swedish Companies Act (Sw. the price of the shares Aktiebolagslag (2005:551)), payment of dividend is resolved at the shareholders’ meeting. The amount The Company could, in the future, decide to offer of dividend paid and time of payment is proposed by shares or other securities in the Company to finance the board of directors. Furthermore, the main rule is new capital-intensive projects, in conjunction with that the shareholders cannot decide on higher divi- unforeseen obligations or costs or for other pur- dends than proposed and approved by the board of poses. Any additional offerings could reduce the directors, with the exception of the right of minority proportional ownership and voting rights for the shareholders to demand dividends in accordance Company’s shareholders, earnings per share and with the Swedish Companies Act. If the sharehold- net debt per share in the Company and adversely ers’ meeting does not decide on dividends accord- impact the market price for the shares. ing to what is stated above, shareholders cannot make demands on dividends and the Company has

1. Risk factors 16 2. This is Storytel Storytel aspires to be a global market leader in sto- to listen to and read an unlimited number of books rytelling. Stories add an extra dimension to peo- in the service for a single account. In December ple’s everyday lives, create diversion and make a 2018, Storytel is rolling out a family subscription to boring wait into an exciting experience. Storytel certain markets in the Nordics with different pric- sees boundaries between yesterday’s story for- ing for different subscription plans. In the past four mats and today’s lifestyle. By leveraging technol- years, Storytel has grown the subscriber base from ogy, Storytel is democratising stories by providing a just above 100,000 subscribers in 2014 to over platform for both content creators and users. Today, 700,000 subscribers in 2018 and aims to reach al- Storytel is both a comprehensive print publishing most 800,000 paying subscribers by end of 2018. group and a digital platform provider for stories al- In the same time period, the number of employees lowing the Company to bring together the best of has grown from around 30 to over 400 employees print publishing and technology. Storytelling, of- in the Group and Storytel has expanded to a to- ten associated with physical books, is a long-serv- tal of 14 markets. Since 2013, the Streaming divi- ing source of both entertainment and education. sion has been producing its own audiobooks and Research shows that reading makes people smarter, e-books, primarily through the wholly-owned au- more relaxed and even more empathetic.[1] By fo- diobook publisher Storyside AB (“Storyside”). In cusing on making stories available on a digital plat- 2017, Storytel streamed more than 100 million form, Storytel’s subscribers can reap the benefits hours of audio and by the end of 2018 Storyside is of reading in a way that fits into a modern lifestyle. expected to have produced more than 5,000 audio- Storytel, being both a media & entertainment and books in 17 different languages. The long-term goal print publishing company, specialises in digital for- for Storytel is to be the leading and most innovative mats and makes reading feel simple and enjoyable. digital book service globally and a trusted partner The Group has grown organically and through a fo- for publishers and rights-holders. In June 2018, an cused M&A strategy. The Storytel Group consists of e-book reading device, the “Storytel Reader”, was two main divisions, Streaming and Print Publishing, launched to further promote Storytel’s large library which operate within the media & entertainment of e-books. and print publishing industry respectively. The dif- ferent branches of Storytel are synergetic and help The Storytel Group: Print Publishing Storytel to deliver both premium content and a premium digital distribution platform. Storytel has The Print Publishing division comprises physical been a public company since 2015. book imprints such as Norstedts, Massolit, Printz Publishing, the Danish publisher People’sPress The Storytel Group: Streaming (adults), Rabén & Sjögren and B. Wahlströms (chil- dren and young adults), as well as Norstedts Kartor Streaming can be split into two subdivisions, the AB and book clubs. The Storytel Group entered the technological platform and digital publishing. print publishing market by acquiring Massolit Media Within the Streaming division, the company pro- AB in 2015 ( now merged with Norstedts ), followed vides a platform and subscription service primar- by Norstedts in 2016 and People’sPress A/S ily for audiobooks and e-books under the Storytel (“People’sPress”) in 2017. Through its publishing brand in Sweden, Norway, Denmark, Finland, the imprints, the Storytel Group is now a well-known Netherlands, Poland, Russia, India, Spain, Iceland, physical publisher and literary agency in Europe, es- UAE, Italy, Turkey and Mexico, as well as under the pecially in the Nordic countries. One of the most Mofibo brand in Denmark. Storytel is also prepar- successful authorships has been Stieg Larsson and ing for launch in Bulgaria, Singapore and Brazil. the Millennium Series. The latest published book, Storytel’s subscribers pay a monthly fee between Millennium 5, was released simultaneously in 26 EUR 6 in markets such as Turkey and Russia and up countries. to around EUR 20 in some of the Nordic markets,

1 Gabriel S. & Young A.F. – Becoming a vampire without being bitten: the narrative collective-assimilation hypothesis. Robert S. Wilson, Patricia A. Boyle, Lei Yu, Lisa L. Barnes, Julie A. Schneider & David A. Bennett – Life-span cognitive activity, neuropathologic burden, and cognitive aging. Dr. David Lewis (Mindlab International, Sussex University) – Galaxy Stress Research.

2. This is Storytel 17

3.Background and reasons

Storytel was founded in 2005 as a subscription service for audiobooks. Since its founding, it has developed into the Storytel Group, specialising in the production and distribution of digi- tal book formats. Storytel is also one of the leading print publishers in Sweden and Denmark. The digital books are distributed on a self-developed proprietary tech platform. Storytel has ex- perienced rapid growth and has expanded its operations and service on an international level. Currently, Storytel has established operations in Sweden, Denmark, Norway, Finland, Iceland, the Netherlands, Russia, Poland, Italy, Spain, Turkey, India, UAE and Mexico and is preparing for launch in Bulgaria, Singapore and Brazil. Storytel Norway, as an exception, is a joint venture together with the Norwegian publisher Cappelen Damm AS (“Cappelen Damm”) and is owned 50 percent by Storytel. The board of directors and executive management of Storytel have ambitious growth and scaling plans for the Company and the intention is, in coming years, to further expand the operations to or within, but not limited to countries in, Europe, Asia and Latin America.

The Company’s board of directors has decided to apply for trading of the Company’s class B shares on Nasdaq First North. Storytel was admitted for trading on Spotlight Stock Market on 25 August 2015 and has since then raised capital through preferential rights issues. The latest share issuance was registered on 5 October 2018, in which the Company raised approximately SEK 500 million through a directed issue.

The Company’s board and executive management believe that a listing of the Company’s class B shares on Nasdaq First North is a positive and important step in Storytel’s journey to become one of the leading providers of digital books in the world and strengthen the Company’s brand on the market. Moreover, the listing change can give Storytel further access to Swedish and international stock market investors which facilitates for Storytel to be successful in realising its growth strat- egy, through organic growth and forthcoming acquisitions. With reference to the background and reasons above, Storytel’s board of directors considers that this is the right timing for application of the Company’s class B shares to Nasdaq First North.

The Company Description does not contain any offering of class B shares or any other offering of financial instruments in the Company. In addition, reference should be made to the full particulars of the Company Description, which has been prepared by the board of directors of Storytel in connection with the application for listing of the class B shares on Nasdaq First North.

The Board of directors of Storytel is responsible for the contents of the Company Description. It is hereby assured that all reasonable precautionary measures have been taken to ensure that the information contained in the Company Description, as far as the board of directors is aware, corresponds to the facts and that nothing has been omitted that would afect its importance.

Stockholm, 3 December, 2018 Storytel AB (publ) The Board of Directors

3. Background and reasons 18 4. Market overview

Overview of the market Media & Entertainment Digitalisation has not reached a peak yet and is pre- Rise of Digital and streaming entertainment dicted to continue to change and disrupt indus- tries.[2] In many countries digital book formats are Emerging technologies allow entertainment and underdeveloped, but Storytel has confidence in media companies to differentiate by creating inno- that the worldwide penetration level of the digital vative user experiences. New technology has not book format will reach similar or higher levels than only changed how people consume media but also the ones in the US and UK. Sweden is already at the how companies can set up their business models. forefront in the audio segment with a market pen- Spotify and Netflix, among others, are testimonies etration of around 5 percent. However, in many of the change in how people consume and pay for markets the penetration is still less than 1 percent media and entertainment. The economy of enter- according to Storytel’s own estimations. The tainment has moved from ownership to access and Storytel Group, being active in both the global me- customers today expect broad catalogues of con- dia & entertainment industry as well as the global tent to be available to them, on demand, in ex- print publishing industry, specialises in digital for- change for a monthly payment as part of a subscrip- mats and makes reading feel simple and enjoyable. tion. A personal and physical library of music, films Storytel provides a technological platform for con- and books is widely considered less desirable than tent creators and users and is also a producer of au- access to a larger library that is shared and cloud- diobooks, e-books and printed books. Since 2018, based. Connectivity is ubiquitous and with virtually the Company also sells its own hardware, the unlimited coverage, capacity and bandwidth, con- Storytel Reader to promote the Company’s library sumers’ mobile devices are always ready to be of e-books. The global media & entertainment in- used.[5] dustry is growing rapidly as the smartphone pene- tration increases, broadband connectivity expands Penetration of the smartphone and paying for content through subscription ser- vices becomes more popular.[3] The global print Today the smartphone penetration is around 85 publishing industry, including educational litera- percent in developed countries and owners interact ture, was valued at EUR 122 billion in 2017 and is with their smartphones 54 times per day on aver- characterised by a strong concentration among a age. By the end of 2023, penetration of smart- few markets such as the US.[4] The synergies gained phones among adults in developed countries is pre- by being active within both the global media & en- dicted to exceed 90 percent and smartphone tertainment industry as well as the global print pub- owners are expected to interact with their phones lishing industry help Storytel to deliver both pre- on average 65 times per day, corresponding to a 20 mium content and a premium digital platform. percent increase over 2018.[6]

2 Strategy& – Industry 4.0 - How digitalization makes the supply chain more efficient, agile and customer-focused.

3 PwC – Global Entertainment & Media Outlook 2018–2022. 4 BookMap – How Big is the Global Publishing Industry?, Publishing Perspective’s. 5 Deloitte Global – Technology, Media and Telecommunications Predictions 2018. 6 Deloitte Global – Technology, Media and Telecommunications Predictions 2018. 4. Market overview 19

This means that smartphones are, and will increas- diences because of their original content that is only ingly be, an integral part of people’s everyday life made available on their respective platform.[9] and the growth can be understood by new main- stream applications such as in-store payment op- Content curation refers to companies’ ability to tions, but also by more intensive use of existing ap- store and recommend the most relevant material to plications. There is an extensive number of apps its subscribers. Success in this area requires the use available today so for companies to monetise their of artificial intelligence alongside content experts services they need to be truly value-adding to its to provide the best user experience. Subscribers ex- users and keep innovating. As the smartphone will pect more than one-size-fits-all services and de- be the primary means of accessing media & enter- mand a personal user experience. Data and analyt- tainment content and services, the mobile experi- ics will continue to play a pivotal role in media & ence will be the industry’s focus area rather than entertainment and first-party data has emerged as traditional sales and distribution approaches. By one of the most valuable company assets because 2020, smartphone data consumption is predicted it allows for personalisation of services. to surpass fixed broadband data consumption, plac- ing app-based platforms in a good position for fu- Competition in the media & entertainment ture growth in the industry.[7] industry

Consumer spending on subscription services The media & entertainment industry consists of a variety of streaming content providers includ- By the end of 2018, 50 percent of adults in devel- ing video, music and podcasts providers. Although oped countries are predicted to have two on- other subscription services such as Spotify and line-only media subscriptions on average, and by Netflix currently focus on other types of content the end of 2020, that average is likely to have dou- than Storytel, they answer to similar customer de- bled to four subscriptions. Already, 20 percent of mands and leverage the same type of trends and adults in developed countries pay for, or have ac- technology. Also, the companies mentioned above cess to, at least five paid-for online media subscrip- are, like Storytel, competing for people’s increas- tions, and it is predicted that by the end of 2020, ingly limited time and attention. On the other hand, that same group will have 10 subscription services. different subscription services help each other This group will likely, by the end of 2020, spend an grow as every company’s success contributes to average of EUR 85 per month on subscription ser- educating consumers about the subscription con- vices. Note that this excludes traditional media sub- cept and the value of streaming. In other words, the scriptions like pay TV and newspapers. By the end global streaming services set a behaviour and act as of 2018, it is predicted that there will be 350 million enablers of adoption to new subscription services media & entertainment subscribers worldwide.[8] when they enter into new markets.

Content creation and curation Global audio trend

For most subscription services within media & en- The audio format in general is growing in popular- tertainment today, it is of central importance to out- ity as displayed by the growth in audiobooks and perform competitors in both the creation and cura- podcasts as well as in smart speakers.[10] Listening tion of content. Content creation can, for example, to content makes learning and enjoying text-based be done by offering content in the form of origi- entertainment possible in situations when reading nal productions. Original productions may not only the same content would not be possible, such as have better margins than licensed material, but they while commuting or working out. In addition, re- also allow content creators to develop content spe- cent research has shown that audiobooks produce cifically tailored for the preferences and interests of a stronger emotional and physiological response its subscriber base, thereby reducing churn. It also than visual storytelling.[11] When measuring heart allows for the development of specific content that rates, body temperature and skin conductance the can attract new user segments to the service. researchers found that emotional engagement was Leveraging data by combining intelligence and stronger with audio storytelling rather than visual; insights in the process of content creation re- the same result could be observed across different sults in produced content that is demanded and genres and demographics. This suggests that the that subscribers perceive as worth paying for. audiobook is in fact a powerful storytelling tool that Video streaming platforms such as Netflix have can be highly engaging. sucessfully managed to attract and retain large au-

7 PwC – Global Entertainment & Media outlook 2018-2022. 8 Deloitte Global – Technology, Media and Telecommunications Predictions 2018. 9 Article CNBC – Netflix’s original content could boost its international subscriber base 50 percent by 2020, analyst says. Article Wired – Netflix is killing it - big time - after pouring cash into original shows. 10 Edison Research & Triton Digital – The Infinite Dial 2018. 11 Daniel C. Richardson, Nicole K. Griffin, Lara Zaki, Auburn Stephenson, Jiachen Yan, John Hogan, Jeremy I. Skipper & Joseph T. Devlin – Measuring 4. Market overview narrative engagement: The heart tells the story. 20 The Global print publishing industry The global print publishing industry, including educational literature, was valued at EUR 122 billion in 2017.[12] It is an industry characterised by a strong concentration among few markets, with the six larg- est book markets accounting for 66 percent of the worldwide print publishing business; the industry is primarily driven by the United States, China and Germany.

Publishing, with focus on books, can be divided into the following three cross-sections:

• Publishing category vs consumer category – Storytel Print Publishing is active in the publishing category and Storytel Streaming is active in the consumer category.

• Physical vs digital books – Storytel Print Publishing produces and distributes physical books while Storytel Streaming is focused on digital book formats.

• E-books vs audiobooks – Storytel Streaming wants to provide good stories in both text and audio formats.

Digital books Physical books

E-books – Making a digital Audiobooks – Recording audio Production of printed books. copy of a script in text format. versions of scripts. It can also Physical books can be further be Audio-first. divided into soft-cover and hard-cover books.

12 BookMap – How Big is the Global Publishing Industry?, Publishing Perspective’s.

4. Market overview – The Global print publishing industry 21

On a global level, there is strong growth in distribut- Swedish book market, the first half of 2018 showed that ing the digital book formats. The performance of physi- total book sales increased by 6.2 percent. This growth cal books is influenced negatively by the declining sales can be attributed to the subscription-based distributors from brick and mortar bookstores. Considering the of digital books. In the first half of 2018, it was reported Swedish market and excluding streaming services for that the subscription-based book sales increased by digital books, the physical book market did not grow 36.9 percent and that today 40 percent of books sold in between the years 2016 and 2017. However, when Sweden are through a subscription service.[14] Counting subscription-based providers of digital books are in- the number of books sold, the sales grew by 15.1 per- cluded the Swedish book market’s total sales increased cent. Again, this growth can be explained by the sub- by 4.2 percent between 2016 and 2017, and the sub- scription-based distributors of digital books where vol- scription-based providers of digital books grew by 50.1 ume increased by 49.2 percent. percent in terms of sales.[13] Taking a closer look at the

Growth in Swedish Book sales volume, January - June 2018

50,00%

37,50%

25,00% 49,20%

12,50%

9,90% 0,00% -4,90% -9,20%

-12,50% Physical bookstores Digital bookstores Grocery sales Streaming Services and book clubs

Source: Svenska Förläggareföreningen – Bokförsäljningsstatistiken Första halvåret 2018.

13 Svenska Förläggareföreningen – Boken 2018. 14 Svenska Förläggareföreningen – Bokförsäljningsstatistiken Första halvåret 2018.

4. Market overview 22

The book segments - performance and some markets, Storytel has been part of creating a competitive environment market for the audiobook.

The audiobook The e-book Audiobooks are the fastest growing segment within E-books were widely popularised when Amazon the digital publishing industry, with the US being launched its e-book reader, the Kindle, in 2007. the biggest market for the audio format in 2017. In In English-speaking countries, the e-book is used the US audiobook sales generated EUR 2.4 billion by a significant part of the population, but in many in 2017, which is an increase of 22.7 percent over European countries it is still in the beginning of a dif- 2016, and the Audiobook Publishing Association fusion process. Today, most large publishing houses reported a 33.9 percent increase in the number of such as Penguin Random House, Hachette Livre and audiobooks published compared with the previous HarperCollins produce books in the e-book format, year.[15] According to the same publication, 26 per- however it has been reported that self-published cent of the US population listened to at least one literature has taken over the big five traditional audiobook in the last year. Audiobook sales have publishing groups in terms of sales of e-books.[18] doubled in the UK in the past five years and in 2017 In North America and the UK, e-books had a share audiobook sales rose by 12 percent in volume and between 15 and 25 percent of the largest publish- 15 percent in value. Digital audio is now 5 percent ers’ sales in 2013, but ever since that share has de- of consumer book spending.[16] The growing pop- clined, this can be understood by the rise of Amazon ularity of the audiobook is also proven by the fact and self-publishers.[19] In Sweden, the e-book mar- that the New York Times now publishes an audio- ket is currently a small part of the total book pub- book bestseller list. Audio rights are also consid- lishing industry and is estimated to be less than one ered increasingly valuable and audiobook services percent. E-books can best be read on regular tablets are now bidding to acquire exclusive audio rights or specifically dedicated e-readers. Distributors of against the traditional publishing houses in the e-books have caught on and developed their own larger audiobook markets. e-reading tablets and key players within that field are Amazon’s Kindle, Barnes & Noble, Bookeen, In 2017, the global audiobook market was valued Kobo and Sony Corporation. In 2018, Storytel, de- at approximately EUR 3 billion.[17] The growth in au- cided to launch its Storytel Reader for e-books and diobooks is predicted to continue and there are nu- it was ready for orders in late June the same year. merous forces within the industry that publishers, authors and audiobook distributors alike can capi- The physical book talise on. Growth is partly driven by the sheer num- ber of titles and categories that are now available, The global physical book industry is primarily com- making an audiobook subscription increasingly at- posed of a small number of large international tractive. With more titles, audiobooks do not only publishers like Pearson, Penguin Random House, cater the needs of the mass market but can also Hachette Livre and HarperCollins. In Sweden, the satisfy readers with niche interests. In addition, as largest publishing house is the Bonnier Group more people listen to audiobooks, awareness in- followed by Storytel’s wholly owned subsidiary creases among consumers as well as among au- Norstedts. Unlike inherently global entertainment thors and agents. Some authors write directly for forms like music, video and games, the physical audio rather than for print, known as straight-to- book market is characterised by strong local pub- audio production. The success of an audiobook was lishers and distributors. No single company has once thought to be directly correlated with the suc- so far been able to cater to a global book reading cess of the print book, which has been shown to not community and this is primarily due to readers’ pro- always be the case. Dedicated audiobook fans now pensity to consume stories that are written by na- choose titles because they are good audiobooks, tive authors and that are written in their native lan- not necessarily because they are good printed guage. books. Audible and Storytel have emerged as two of the leading audiobook services with global am- The brick and mortar book business has been dis- bitions and with strong emphasis on international rupted by the advancement of e-commerce, par- expansion in Europe. In Sweden, there are primar- ticularly by Amazon, and it is primarily the distrib- ily two other providers of audiobooks that compete utors, the bookstores, that are now faced with with Storytel: BookBeat and Nextory. Both are also more intense competition and pressure on prices. operating in Finland. In the other markets where In Sweden, for the first half of 2018, revenue from Storytel has launched its service, it varies if there physical bookshops fell by 5.2 percent and grocery are any competing digital book services or not. On trade declined by 5.8 percent compared with the first half of 2017.[20] 15 Good e-Reader – Global Audiobook Trends and Statistics for 2018. 16 Good e-Reader – Global Audiobook Industry Report for the First Half of 2018. 17 Good e-Reader – Global Audiobook Trends and Statistics for 2018. 18 Ruediger Wischenbart Content and Consulting – Global eBook Report 2017. 19 Ruediger Wischenbart Content and Consulting – Global eBook Report 2017. 20 Svenska Förläggareföreningen – Bokförsäljningsstatistiken Första halvåret 2018. 4. Market overview – The book segments 23 The value chain The value chain, which consists of all the diferent steps needed to develop, produce and distribute a product or service from start to finish, will difer depending on the industry and market segment. The value chain for media & entertainment, digital publishing and print publishing respectively are presented below.

Media & entertainment – the platform

For a digital platform providing content the value format. Alternatively, the content is produced as chain is not linear and processes are iterative. In an original in-house production. Once the content an integrated supply chain there is a central supply has been secured, it can be ingested onto the plat- chain control power, which in this case can be a pro- form and is thereby made available to the custom- vider of a digital platform.[21] A first step is usually to ers. When the content is ingested onto the platform, develop the actual platform where content can be it also needs to be curated, which is the process of distributed. The content that is to be distributed on making content available to users in a way that is the platform needs to be collected, either through easy to navigate and explore. For customers to find an acquisition of content that is already produced in the platform to start with, there is a need for mar- the right format or the platform provider might ac- keting of the platform so that people buy it or sub- quire the rights to produce the content in the right scribe to it.

Platform design → Acquire or produce content → Ingest content onto platform → Curation of content → Marketing and sales of the platform → Customer

Digital publishing – audiobooks and e-books

Within the digital book industry, some companies duced so that the company can distribute it in ex- produce their own content while others license ti- change for paying royalties as the given title is con- tles to distribute the content on a platform. Others, sumed. like Storytel, do both. When licensing content, the audiobook and/or e-book distributor needs to sign It can also be the case that no audiobook or e-book an agreement with the rights owner to be allowed has yet been produced for a physical title. In that sit- to distribute a title. Once agreements have been uation the production rights need to be acquired to signed granting the distributor the right to distrib- be able to distribute the audiobook or e-book. Once ute an audiobook or e-book, they can be uploaded the rights have been purchased, the audiobook or to the company’s distribution platform and made e-book needs to be produced through a production available to its customers. This assumes that any company before it can be made available on the dis- given audiobook or e-book has already been pro- tribution platform.

Content creator → Agent → Publisher → Audiobook/E-book producer → Audiobook/E-book distributor → Marketing and sales of audiobook/e-book → Customer

Print Publishing – physical books

Publishing a physical book, in the traditional way, books and non-fiction. It is also common to include usually starts with a content creator – be it a writer freelance workers for editing, translation and de- or illustrator - with an idea. By working with a pub- sign. Next, paper manufacturers provide materi- lisher, a content creator receives help with editing, als and printing companies are engaged to create design, copyright law and printing. Sometimes con- the physical copy of the book. The publisher usually tent creators work with an agent to find the right arranges the printing process and not the content publisher and to negotiate terms. It may also be creator. Finally, distribution to the end customer is that a publisher or agent proposes a book idea to a facilitated mainly by booksellers, both physical and content creator, this is especially common for fact online distributors are common.

21 Strategy& – Industry 4.0 - How digitalization makes the supply chain more efficient, agile and customer-focused. 4. Market overview – The value chain 24

Content creator → Agent → Publisher → (Freelance workers) → Paper manufacturers → Booksellers → Customers

Self-publishing has challenged the traditional model People can listen to books when a print copy or by allowing content creators to skip the publishing e-book would not be possible to read, for example step and go straight to printing through printing while driving or doing housework. According to houses. Storytel’s subscribers, the top three occasions for listening to audiobooks are while commuting to [24] Underlying belief in market growth work, when doing chores and before going to bed. Digital formats allow people to read more and 75 Digitalisation has not reached a peak yet and is pre- percent of Storytel’s subscribers have reported that dicted to continue to change and disrupt indus- they consume more books since subscribing to tries.[22] In many countries digital book formats are Storytel. underdeveloped, but Storytel is confident that the worldwide penetration level of the digital book for- Enriching people’s lives mats will reach a similar or higher level than in the US and UK. Below are some indicators as to why: Books make people more knowledgeable and stim- ulate the brain in ways that can be both entertaining Streaming and subscription-based payment to- and challenging intellectually. Studies have shown gether form a widely accepted model a link between regular reading and higher intelli- gence, lower stress and more empathy.[25] Reading Spotify, Netflix and Storytel, to name a few, have is important for all ages and for children it is im- proven success with this business model despite fo- portant for building a vocabulary and for elderly cusing on different media & entertainment catego- reading is a way to delay mental decline. A study ries. Amazon-owned Audible is also offering an un- at Berkeley showed that kids who read children’s limited streaming subscription model in a number books were exposed to 50 percent more words of markets, although they have the so-called credit than kids who watched TV or listened in on a con- model in their largest markets where a subscriber versation between college graduates. Exposure to pays for one book a month and then adds on cred- new vocabulary has in turn been linked to higher in- its if the subscriber wishes to listen to additional telligence.[26] Books use a more extensive vocabu- books. In order to pursue a subscription-based lary that enriches and improves people’s linguistic business model, strong content is essential to get and cognitive abilities. consumers to sign up and not churn (unsubscribe). In a world where people have almost unlimited ac- While the advantages of habitual reading are cess to information, it may not be the content that well-documented, books compete with many other subscribers will pay for in the long-run. It could sources of entertainment and social media. With to- rather be the curation that is key to long-term suc- day’s many entertainment services and social me- cess. dia, the amount of information consumed in a day can be overwhelming and cause distress. Social me- The advantages of digital formats dia usage commonly results in stress, and this spe- cific stress has been shown to have a negative im- The second core underlying factor for anticipated pact on sleep.[27] In 2018, 45 percent of global adult future growth of digital books are the advantages smartphone users will have worried that they use that they offer. Firstly, digital book files, both audio- their phones too much for certain activities, and books and e-books, require little data space and as 45 percent of all adult smartphone users will also a result a user can carry almost an unlimited amount have tried to limit their phone usage.[28] According of titles in one’s smartphone. This also allows dis- to the same source, this concern will be especially tributors of audiobooks to offer, in theory, an unlim- big among people in the age 18-24. Going forward ited amount of titles, including backlist (usually de- it will therefore be increasingly important to focus fined as titles older than 12 months), as they are not on producing and distributing high quality content bound by physical limitations such as shelf space that people find enriching, for example an interest- and inventory logistics to the same extent. Also, au- ing audiobook. diobooks fit well into the modern lifestyle and pub- lishers agree that audiobooks help them bring in new customers.[23]

22 Strategy& – Industry 4.0 - How digitalization makes the supply chain more efficient, agile and customer-focused. 23 Article by Michel Lafrance (on The Bookseller.com) – How audiobooks can take on Netflix. 24 Storytel – Global Customer Satisfaction Survey 2018, Q1. 25 Gabriel S. & Young A.F. – Becoming a vampire without being bitten: the narrative collective-assimilation hypothesis. Robert S. Wilson, Patricia A. Boyle, Lei Yu, Lisa L. Barnes, Julie A. Schneider & David A. Bennett – Life-span cognitive activity, neuropathologic burden, and cognitive aging. Dr. David Lewis (Mindlab International, Sussex University) – Galaxy Stress Research. 26 Tom A. F. Anderson & C.-H. Ruan – Vocabulary and the Brain: Evidence from Neuroimaging Studies. 27 Winneke A. van der Schuur, Susanne E. Baumgartner & Sindy R. Sumter – Social Media Use, Social Media Stress, and Sleep: Examining Cross-Sectional and Longitudinal Relationships in Adolescents. 28 Deloitte Global – Technology, Media and Telecommunications Predictions 2018. 4. Market overview – Underlying beleif in market growth 25

Changes in VAT regulations within the EU

On 2 October 2018, ECOFIN (Economic and directives and lowered the VAT on digital books. Financial Affairs Council) decided to allow each Storytel believes chances are good that Sweden will member state to reduce their value added tax lower its VAT rates on digital books. Among other (VAT) on digital books, which includes streaming indicators, Swedish Minister of Finance Magdalena and downloading audiobooks and e-books. This de- Andersson and Minister of Culture Alice Bah Kuhnke cision allows Sweden and other member states to have explained in a co-authored opinion piece in reduce VAT-rates, which in Sweden would be from the Swedish daily Dagens Nyheter that they intend 25 percent to 6 percent, hence puts sales tax in line to reduce the VAT on digital publications as soon as with the sales tax on paper books. Some countries EU regulations adjust to allow it. such as France and Italy have previously ignored EU

4. Market overview – Changes in VAT regulations within the EU 26 5. The Storytel Group

Her skal Kolunmetitel være 27

Introduction

Storytel was founded in 2005 as a subscription 1) profitable markets 2) scaling up markets and service for audiobooks. Since its founding, the 3) in preparation markets. The profitable markets Company has developed into the Storytel Group, are the markets currently producing a surplus that specialising in the production and distribution of can be used to finance the entry into new markets digital book formats and Storytel is also one of the and the scaling up of the recently launched mar- leading physical publishers in Sweden & Denmark. kets. Markets in the “scaling up” phase are markets The digital books are distributed on a self-devel- in which Storytel has launched its service and made oped proprietary tech platform. Currently, Storytel material marketing investments, but that have not has established operations in Sweden, Denmark, yet reached a profitable stage. The markets in prepa- Norway, Finland, Iceland, the Netherlands, Russia, ration are those that have been communicated to Poland, Italy, Spain, Turkey, India, UAE and Mexico the public, but where either the service has not yet and is preparing for launch in Bulgaria, Singapore been launched or no material marketing activities and Brazil. Storytel Norway, as an exception, is a have been initiated yet. The profitable Storytel mar- joint venture together with the Norwegian pub- kets are Sweden, Denmark, Norway and Iceland. lisher Cappelen Damm and is owned 50 per- The countries in the scaling up phase are the cent by Storytel. The markets in which Storytel Netherlands, Finland, Russia, Poland, Turkey, Italy operates can be divided into three categories: and Spain. Markets in preparation are India, UAE, Bulgaria, Mexico, Singapore and Brazil.

Vision A Make the world a more empathetic and creative place with great stories to be shared and enjoyed anywhere and anytime

Mission

• Inspire people of all ages to discover the world of stories by B building an accessible and personalised storytelling experience using technology, insights and data

• Help people unlock their creativity and share stories by connecting storytellers with a global audience

• Provide meaningful context to people’s lives by establishing Storytel as a universal brand synonymous with storytelling

• Attract and develop exceptional people by nourishing a diverse workplace built on trust, innovation and collaboration

5. The Storytel Group – Introduction 28

2005 Jonas Tellander & Jon Hauksson founded Storytel

2008 Funding secured in Swedish TV show Dragon’s Den

2011 First audiobook produced

2016 Norstedts, the second largest print publishing house in Sweden and Danish competitor Mofibo were acquired

2017 People’s Press, the fourth largest print publishing house in Denmark was acquired

5. The Storytel Group– History and important milestones Print publishing 29

International expansion

Digital publishing

Audiobook and E-book subscription service

2005 2011 2013 2015 2018

History and important milestones In 2014 Storytel entered into the Norwegian mar- ket and e-books were added to the Company’s ser- 2005 - 2008: Startup phase vices, with the feature of switching between audio and text seamlessly. In 2015 Storytel became a Jonas Tellander together with co-founder Jon listed company, with shares traded on AktieTorget Hauksson decided to create their own audiobook (now Spotlight Stock Market) through the acquisi- service from scratch. Collaboration agreements tion of the shares in Massolit Media AB. Storytel were signed with Storyside and Earbooks; the com- launched its service in Finland and Poland and by pany (then known as BOKiLUR) was registered and the end of 2015, Storytel had 356,000 paying sub- the first subscribers were recruited at a book fair in scribers. Gothenburg, Sweden. Storytel raised external cap- ital and in 2007 the company changed name to 2016 - today: Active M&A strategy and Storytel. By the end of 2008, Storytel had 2,000 global roll-out paying subscribers. In 2016, Storytel acquired both Norstedts, the 2009-2012: Smartphone penetration second largest publishing house in Sweden, and Mofibo, a Danish audiobook and E-book distribu- In 2009 collaboration agreements with Bonnier and tor. In 2017, the international expansion was ac- Norstedts were signed. Early 2011, Rustan Panday, celerated by launching Storytel’s service in Russia, current chairman of the board, joined the board of Spain and India. Moreover, the Danish publishing directors in Storytel Sweden AB. In 2012, a partner- house People’sPress was acquired. In 2018, Storytel ship deal with Telia Company AB (“Telia”) was signed, launched its service in Iceland, UAE, Turkey, Italy which still exists today. By the end of 2012, Storytel and Mexico. Preparations to launch in Bulgaria, had 35,000 paying subscribers. Singapore and Brazil were initiated. By the end of 2018, Storytel aims to reach almost 800,000 paying 2013: Started to produce own content subscribers. In November 2018, Storytel applied for a listing on Nasdaq First North. In 2013 Storyside and Earbooks were acquired and this marked the starting point for a new stra- Organization tegic direction where Storytel started to buy au- dio rights and produce its own content. In the same year, Storytel launched its service in Denmark and Global functions the Netherlands and later acquired the audiobook Storytel’s internal organisation is divided into global producer Rubinstein Audio (renamed to Storytel functions and local roles for each market. The Publishing Netherlands NL BV). The first audiobook global functions serve to support the local mar- series “Sagan om Isfolket” was released. By the end kets and most of them are located in Stockholm of 2013, Storytel had 77,000 paying subscribers. and Copenhagen. The expansion team analyses op- portunities in new markets and at a later stage in 2014-2015: Beginning of the normalisation of the process works with the global functions to en- subscription services sure that new markets get off to a strong start. The

5. The Storytel Group – History and important milestones 30

commercial, content and publishing teams help the Culture country teams succeed in their respective market. The tech team works to develop all parts of the ser- Storytel is a value-driven company and embraces a vice and also works to ensure that everyone has the lot of different cultures as the Company is present in right tools to succeed. The finance & legal team en- many parts of the world. The employees at Storytel sures that all activities comply with regulations in unite under a set of values that drive the every-day all jurisdictions and are a vital part of being able to work and how everyone relates to colleagues, busi- implement and follow up on the Storytel game plan ness partners and subscribers, which is also out- successfully. They also support in Storytel’s day to lined in the Storytel Code of Conduct. The culture day activities. The commercial team centres around at Storytel is characterised by dedication, innova- how Storytel communicates, reaches out and sup- tive thinking, collaboration, a customer-first mind- ports its subscribers and includes: marketing and set and non-hierarchical atmosphere. At Storytel all branding, CRM, customer support and partnerships employees are given a lot of responsibility and trust to support all launched markets in their market ac- to drive the business forward and help the individ- tivities. The operations team ensures that Storytel is ual to grow. an attractive place to work where the staff can grow, learn new things, have a good time and create value Business model and strategy for the business. The intelligence team makes sure that Storytel makes decisions that create the most The global media & entertainment and publishing value to both subscribers and to the Company. industries are changing and Storytel, operating in both of the mentioned industries, is in a position to Local markets leverage key industry trends and forces. Storytel as- pires to create the best digital service for storytell- Storytel believes in having a strong local presence ing while cultivating and expanding the publishing in the markets in which the Storytel Group operates. industry. The Company makes use of modern tech- Therefore, in each local market, a country manager nology but at the heart of the service is the telling is recruited to help establish Storytel and develop of great stories. Through Storytel’s business model, the digital book market in that country. The country authors can earn money from old texts and push manager’s profile is usually a strong local entrepre- their backlist in a more effective way. Also, actors neur with relevant industry experience and the can work as narrators of audiobooks, creating a new country manager then recruits for local roles in con- revenue stream for cultural workers. tent and marketing among other fields. Business model streaming and Print Publishing digital publishing

The Print Publishing division consists of a number Storytel charges its customers on a monthly basis of publishing companies that are owned by Storytel. in advance. Prices vary between different markets Norstedts Publishing house, the oldest and sec- from EUR 6 in markets such as Turkey and Russia ond largest publishing house in Sweden, was ac- and up to around EUR 20 in some of the Nordic quired in 2016. Norstedts has signed multiple well- markets for a single subscription. After payment is known authors and has had a recent widespread made subscribers can listen to and read an unlim- success with the Millennium series. Norstedts ited number of books in the service. All consump- Publishing house also publishes children’s books tion is tracked and at the end of a reporting pe- through Rabén & Sjögren, for example titles by riod, Storytel calculates total number of books or Astrid Lindgren. Since 2018 all print publishing ac- hours consumed. Revenues from customers after tivities in Sweden is collected in Norstedts, hence VAT and deduction of payment charges such as Massolit and B.Wahlströms have been merged with Visa, Mastercard, Apple, Google etc. (Net Revenue) Norstedts and Rabén & Sjögren. In 2017, Storytel are shared with publishers, normally Storytel keeps acquired People’sPress, the fourth largest publisher between 40-50%, and 50-60% are paid to publish- in Denmark, which publishes books by authors like ers of Net Revenue, whereas some publishers are Sara Blædel and Camilla Läckberg. owned by Storytel and some are third-party publish- In 2018 Norstedts acquired the smaller publisher ers. Publishers pay royalties to the authors based on Printz Publishing. the revenues received from Storytel. Storytel owns both digital publishers and print publishers. Print Publishing is described in section “Business Model Print” below. For Digital publishers the largest and

5. The Storytel Group – Business model and strategy 31

sometimes only distribution channel is Storytel. lishers have shown that Storytel can increase the Except for advances on royalties paid to authors, efficiency in the publishing process, produce more production cost for audiobooks are expensed as bestsellers and turn loss to profit. By being involved they occur as well as royalties, hence affects the in creating new stories, Storytel can experiment gross margin. with new ways of writing stories that are better adapted for digital formats. Storytel has also ac- Business model print quired audiobook publishers and/or audiobook dis- tributors, as a step of entering new markets, such The traditional publishing house starts with the au- as in Iceland, Turkey, Russia and Bulgaria. The un- thor in the top of the cycle. The author presents an derlying strategy has been to connect Storytel with idea or a manuscript that is then managed and pro- a strong local entrepreneur who is interested in the cessed by the publisher which acquires the rights to audiobook market and to acquire a catalogue of dig- the work from the author. The publisher takes the ital books in the local market. Storytel has also ac- financial risk of production, editing, printing, dis- quired tech companies, with the Danish company tribution, stockholding, sales and marketing. The Mofibo being one of the most prominent ones, both publisher also has contacts with the physical and in terms of acquisition price and operations. digital resellers who present the work for the final consumers. The final products/editions of the au- Expansion strategy thors are here referred to as “works”, as they in- clude several different types of formats, such as Storytel has adopted a “Glocal expansion model”. hardback editions, paperback editions and digital This means that the catalogue is tailored for each editions as e-book and digital audiobook (mainly market and that Storytel has a strong local pres- consumed as streaming through digital subscrip- ence with a local team specialised in their respec- tion services in Sweden). The price on the dif- tive market. Today, Storytel’s international business ferent editions is determined by the publishing make up more than half of the user base as well as house based on the costs, such as editing, illustra- streaming revenues. In 2017, streaming revenues tions, printing estimated sales, etc. The prices on from markets outside of Sweden grew by over 100 digital audio however differ, with a fixed consumer percent. There is a model for how Storytel decides price, regardless how many books you listen to and what markets to enter and the Company focuses determined by the subscription services. Except for on entering markets where the Company can take royalties paid to authors, production cost for audio- a market leading position. Other key factors that books are (as for streaming) expensed as they occur, are of importance when Storytel decides to enter hence affects the gross margin. Costs for the phys- a new market is to recruit a strong local country ical books are included in the balance sheet, writ- manager and team, gain access to content, see how ten down (advance royalties and production costs) other subscription services are performing and that and expense when the products are sold. Storytel can charge their customers on the recur- ring subscription model. The book industry is dif- Acquisition strategy ferent from both the music and film industry in terms of locality. Around the globe, people prefer Storytel’s acquisitions so far can be grouped into to read and listen to local stories in the native lan- two different acquisition categories, publishers and guage. Therefore, when Storytel enters a new mar- tech companies. Storytel has historically been most ket, the top priorities are to have a strong catalogue active in the first category and has acquired the in the local language and have a local team with a publishers B. Wahlströms, Massolit, People’sPress, deep understanding of what stories are consumed. Norstedts and Rabén & Sjögren amongst other Oftentimes there is a limited catalogue in the new smaller publishers focused on digital content. The market which means that Storytel must set up its strategic motive for Storytel to integrate back- own audiobook production in that market. The wards in the value chain is to be active in develop- quality and quantity of the content correlates with ing new titles and to come closer to the authors. churn, and the start-up phase is focused on build- This has given value to Storytel, its subscribers and ing up the catalogue. the rights holders. The previous acquisitions of pub-

5. The Storytel Group – Business model and strategy 32

Glocal expansion model

3 1 2

In preperation Scaling up Profitable

1 2 3

Secure quality content Build awareness and Develop subscriber base and prepare for launch grow content catalogue and fine tune sevices

5. The Storytel Group – Glocal expansion model 33

Service strategy

When developing Storytel’s service, the focus is publisher is under no obligation to grant exclusivity equally much on content and the platform. The and the rights should be worldwide. When Storytel technical aspects of the service, including the user licenses rights and produces the content in-house, interface, key features and payment solutions are the standard terms are that Storytel is granted the vital to both attract and retain subscribers. Storytel exclusive right to record the content. Rights are has pursued a subscription-based model since its normally negotiated for a period of five to ten years inception, even though it was novel and rare back and the finished recordings can be distributed to in 2005. At that time, the market was not ready for other sales channels. the subscription model but the introduction of the iPhone and the growing habit of downloading apps As the Storytel Group owns several publishing started to change this. Other media subscription houses through its publishing arm, the Company services, combined with the smartphone penetra- owns a lot of rights in-house that can be produced tion and trust in direct debit, have contributed to into audiobooks or e-books and they can also be li- the success of Storytel’s subscription-based model censed to other actors on the market. Storytel has a and are factors that are analysed on each market strong and reputable publishing and content team. that Storytel enters. The success is not only demon- As mentioned, the Company is not only focused on strated by a growing subscriber base but also by be- a tech platform for audiobook and e-book distribu- ing profitable in multiple markets. Working with the tion, but also a substantial portion of the Storytel customer in mind, Storytel leverages modern tech- workforce is dedicated strictly to content and pro- nology to distribute high quality content that en- duction. rich individuals’ everyday lives. Storytel is on track to launch a family subscription in the Nordic mar- Data-driven decision making kets before the end of 2018, which is a project aim- ing to improve the user experience and offer a bet- Storytel is working actively with improving the user ter deal for families. experience through personalisation. For companies providing content, this mainly refers to giving its us- Content strategy ers a personal set of recommendations based on preferences and previous choices. This means that Storytel’s vision is to be the market leader in story- no content feed will look identical for any two users telling, and that means that the Company needs to and this personalisation will require Storytel to con- provide the best stories. Storytel has a broad cat- tinue investing in analytics, artificial intelligence alogue of content which is a mix of original con- and machine learning techniques. Storytel believes tent developed by Storytel and acquired content. that, investing and adapting to the changes within Storytel’s ambition is to produce high quality con- these areas now and in the future, is a key step in tent internally thus have a significant market share improving the value of the service and make sub- of in-house content in the service. When Storytel scribers even more loyal. In a couple of years, this acquires rights, the deal can either be a third-party will be a basic expectation and the most successful content distribution agreement, or it can be a li- service might not necessarily have the widest cata- censing agreement. Content agreements are gener- logue but rather the most optimal catalogue for a ally based on a revenue share model. In general, the given subscriber.

5. The Storytel Group – Business model and strategy 34

Financial goals / Key KPIs

Subscriber base development Storytel’s subscriber base has grown rapidly, pri- By August 2017, Storytel had over 500,000 sub- marily in the last four years. The subscriber base scribers and the target for 2018 is to end the year reached 100,000 subscribers in May 2014 and with around 800,000 subscribers. In 2018, the sub- 14 months later, the subscriber base had more scriber base as well as streaming revenues from than doubled and reached 212,000 in July 2015. outside Sweden surpassed the Swedish base.

Storytel Sweden International Total

800.000

600.000

400.000

200.000

0

Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 April-16 Sep-16 Feb-17 Jul-17 Dec-17 Sep-18

From January 2014 to September 2018, the Swedish subscriber base has grown with a CAGR of 43 percent, while the international base has grown with a CAGR of 90 percent.

5. The Storytel Group – Financial goals / Key KPIs 35

Contribution profit Contribution profit, Sweden Contribution margin, Sweden Contribution Profit is defined as streaming (thousand SEK)

revenue minus costs for content (licensed 50,000 40% content and in-house productions) and marketing. 40,000 For Sweden, the contribution profit has in- 30% creased proportionally with sales the last 11 quarters, and the contribution margin, 30,000 defined as contribution profit divided by 20% sales, has been steady and averaging 31.2 20,000 percent.

10% The international contribution profit has 10,000 decreased over the last 11 quarters. This is due to Storytel’s aggressive growth strat- egy. When a new market is launched, large 0% investments are made in i) marketing to build Q1 2016 Q3 2016 Q1 2017 Q3 2017 Q1 2018 Q3 2018 the brand and ii) building a catalogue of au- diobooks and e-books. Storytel expenses Contribution profit, International Contribution margin, International all production costs under the current ac- (thousand SEK) counting standard, hence these costs are 15,000 15,00% included in the calculation of contribution profit when they occur. With many markets 10,000 10,00% currently scaling up, the contribution profit for international markets has dropped to 5,000 5,00% minus 10-20 percent the last three quar- 0 0.00% ters. It is expected that the contribution margin for international markets will remain -5,000 -5,00% negative for the coming years. Current in- ternational markets will see improvements -10,000 -10,00%

in contribution margin, but more new mar- -15,000 -15,00% kets will be added, which may affect the contribution margin negatively. -20,000 -20,00% Q1 2016 Q3 2016 Q1 2017 Q3 2017 Q1 2018 Q3 2018

Storytel Norway is included in figures at 100 percent in the in- ternational contribution profit and contribution margin above. Storytel Norway is a joint venture with the publisher Cappelen Damm. In the consolidated group accounts Norway is reported according to the principle of proportional consolidation.

5. The Storytel Group – Financial goals / Key KPIs 36

The trade-off between Growth and The long-term Streaming profitability target for Profitability Storytel Streaming is a 15-25 percent EBITDA mar- gin. Storytel has an aggressive growth strategy and aims to grow top line Streaming sales by 30-40 percent Key KPIs in the coming years. There is however a trade-off between rapid growth and short-term profitability The most important Streaming KPIs for Storytel for Storytel. is Customer Lifetime Value (CLV) and Customer Acquisition Cost (CAC), and specifically the rela- Storytel’s business model has been proven success- tionship in each market between CLV/CAC. As long ful and is profitable in Sweden, Denmark, Norway as CLV is larger than CAC, marketing investments and Iceland. The ambition is to make all markets prof- are adding value. itable, but not before investments in growth start to show declining return on investment. As Storytel CLV is driven by i) the retention profile (how long sees big opportunities in many markets, the aggres- customers on average stay in the service), ii) the sive growth strategy will dominate, at the cost of price of the service and iii) gross margin. Increases profitability in the coming years. Storytel could turn in retention profile and gross margins are the two to profitability at any time, but that would come at areas of CLV that Storytel put most focus on, in or- the expense of long-term value creation. der to increase CLV on each market.

Long-term profitability Storytel’s profitable markets have a CLV/CAC ratio of 2.9x. In other words, for each EUR spent on mar- Storytel has not reached maturity in any market, keting the value of Storytel increases by EUR 2.9.[29] thus the long-term profitability is subject to esti- mations. The most mature market Sweden, includ- ing Streaming and Print Publishing, had an EBITDA margin of approximately 10 percent in 2017. Top line for Streaming was growing at an annual rate of 33 percent in 2017 compared to 2016.

29 CLV was measured using a 48 month estimation period. The subscribers included in the estimation started their subscription during the first six months of 2017 to enable a sufficient amount of retention data for the CLV calculation.

5. The Storytel Group – Financial goals / Key KPIs 37 Print Publishing

Another KPI that is tracked, is the penetration level The Print Publishing division of Storytel is more ma- achieved in each market. In 2018, Storytel is ex- ture. The financial goals for the Print Publishing di- pected to reach a penetration level of around 3.5 vision is to have stable revenues and an EBITDA percent in Sweden, almost 3 percent in Denmark margin of 5-10 percent for the near future. and almost 2 percent in Norway.[30] Storytel be- lieves that this KPI is a good indicator of the growth Marketing & brand prospects in every market. Storytel works actively to increase the penetration partly by marketing the To succeed in new markets and continue to grow service but also by developing new offers such as in profitable markets a strong brand is essential. the Storytel Reader. The price point of the service Storytel invests heavily in marketing on every mar- affects the level of possible penetration. ket, both online and offline channels. Since the au- diobook and e-book are new phenomena on mul- Other important KPIs that are analysed and fol- tiple markets that Storytel has entered, extensive lowed up regularly include, but are not limited to, marketing is needed to both educate the market product engagement (could be described as “daily about the digital book formats alongside the spe- active users”), average finishing degree of books, cific Storytel brand. When Storytel launches the sign-up to trial conversion rates, trial to pay con- service in a new market, the focus is usually first on version rates and churn. online marketing. Multiple KPIs are closely moni- tored to see what works well and this varies from country to country.

Penetration level

4,0%

3,0%

2,0%

1,0%

0,0% 2010 2011 2012 2013 2014 2015 2016 2017 2018

Sweden Storytel DK Storytel NO

Mofibo was acquired in June 2016 but are included from 2013 in the graph

30 Calculated as number of paying subscribers divided by total population.

5. The Storytel Group – Financial goals / Key KPIs Who are the subscribers?

A majority of Storytel’s subscribers are female (64 percent) and they are typically older than 25 but younger than 55 years old. This varies by market and also by what content catalogue is available when the service is launched.

Gender: Top 5 book genres:

1: Crime 64% 2: Fiction 3: Thrillers

4: Fantasy and sci fi

36% 5: Chrildren

Age:

<25 25-34 35-44 45-54 >55

19% 25% 23% 19% 14%

HerSource: skal FacebookKolunmetitel Analytics. være Note: Senior citizens and children underrepresented. 39 Storytel increases reading

20%

of customers didn’t use audiobooks prior to joining Storytel

55%

of customers didn’t pay for audiobooks prior to joining Storytel

75%

of customers consume more books since joining Storytel

80%

of customers also read books occasionally or often

95%

of customers are satisfied with the service Storytel provides

Source: Survey Monkey. Survey made by Storytel, targeting existing subscriber base. 5. The Storytel Group – Storytel increases reading 40 Content portfolio The publishing arm of Storytel distributes literature To distribute and produce general content, Storytel with cultural relevance and commercial potential in either has the rights in-house or the Company has both physical and digital formats. An extra focus is to acquire them. General content are digital books on offering best-sellers and well-known authors’ ti- corresponding directly to a printed version of the tles within fiction, crime, thrillers, non-fiction and same title. The general content is the main content personal development. For kids and young adults, in the app and is available in all of the markets in Storytel offers an extensive catalogue of best-sell- which Storytel operates. ing titles in both local languages and in English. While bestselling books are important, Storytel is Storytel Originals always innovating and investigating new intriguing formats. Since users appreciate different types of Storytel Originals are digital books in a serial format content and have different preferences regarding produced exclusively for Storytel. Each season is length, Storytel offers a broad portfolio of content. usually ten episodes and each episode is around It is important to be able to quickly move to new one-hour long in the audiobook format. For users areas and see how Storytel can consider local de- who are new to the digital book format, this shorter mands in the different markets. Although serialised format is a good way to get started. Storytel storytelling has been around for ages, on-demand Originals are available in most of Storytel’s markets video and audio providers have leveraged this be- and some originals are printed as softcover copies. haviour in recent years. Serialised content that al- lows for “binge-reading” is growing in popularity Storytel Dox and Storytel Originals (as further described in sec- tion “Storytel Originals” below) is a way to ensure Storytel Dox are recorded versions of longer arti- that this demand is met. With a proprietary cata- cles from major magazines and journals. They can logue in 20 languages, Storytel is well positioned vary in length but are typically around 30 minutes to serve the global community with stories in their long. Content-wise the longer-form journalism can native language. be about topics ranging from history, travel, food and people biographies. The audiobooks and General content e-books produced under the imprint Storytel Dox are exclusively produced for the Storytel platform. General content is the catalogue of audiobooks and Currently Storytel Dox are available in Sweden and e-books that are available in the Storytel app. in India.

General Content Storytel Originals Storytel Dox Storytel Brief • Acquired and in-house rights • Scalable in-house audio-first • Long-form journalism from • Summaries major magazines (e.g. management literature) • Non-exclusive • Exclusive to Storytel • Exclusive to Storytel • Exclusive to Storytel • Produced in 17 languages • Produced in most markets • Available in Sweden & India • Currently only in Sweden 41 Storytel Briefs

Storytel Briefs are summaries of non-fiction books, lack of a superior hardware that can be combined primarily management literature. They are typically with Storytel’s business model and that Storytel, 45 - 60 minutes long and are designed to give a as a company, must help create the demand and comprehensive summary of a given book and out- push the market. The Storytel Reader is currently line the key-takeaways. Storytel Briefs are also ex- only distributed on the website and is available in clusive to Storytel and are currently only available Sweden, Denmark and Finland. Storytel subscrib- in Sweden. ers can seamlessly switch between using a mobile device or the Storytel Reader for reading books, Content production meaning that they can keep reading where they last ended in an e-book even when switching to read on Storytel has invested heavily in its in-house pro- another device. duction of audiobooks. Within Storytel works pub- lishers, studio engineers, rights coordinators and Competitive landscape production planners. External help from narrators, proof listeners and audio engineers is also needed. Globally, some of the major streaming book ser- By the end of 2018, Storyside is expected to have vices include Audible, Kobo and Scribd. Audible and produced more than 5,000 audiobooks in 17 dif- Storytel have emerged as two services with global ferent languages. To coordinate and speed up the ambitions and with strong emphasis on interna- production process, Storytel has developed its own tional expansion. In Sweden, there are primarily two proprietary tool for audiobook production. other providers of audiobooks that drive the Swedish market together with Storytel: BookBeat Storytel Reader and Nextory. After the first half of 2018, Storytel had 80 percent of the Swedish market.[31] The re- Storytel launched an e-book reader in 2018 in order quirement to be able to read stories by local authors to push its extensive library of e-books further. The and in local language makes it difficult for the large global e-book market is large but has not reached media companies to enter the market and gain mar- the same level of penetration in Europe as it has in ket share globally, making the requirement to pro- North America. Storytel predicts that this is largely duce content in local languages a barrier to entry. due to low level of knowledge of the e-book and the Storytel has local competition on most markets.

31 Svenska lf Förläggareföreningen – Bokförsäljningsstatistiken Första halvåret 2018.

Image of READER HERE

Her skal Kolunmetitel være 42

Storytel’s competitive advantages

• Efficient and high-quality publishing. • Direct link to customers. Through acquisitions Storytel has become a By having a direct link to the consumers, European market leader in distributing audio- Storytel gains key insights of what content books. Also, Storytel has developed proprietary provides the highest customer engagement technology for efficient recording and editing and loyalty. Data-driven insights are applied to of audiobooks. That, combined with an excel- content creation to maximise customer satis- lent production team, allows Storytel to pro- faction and retention. duce books faster and in a more cost-efficient way. Storytel has also developed strong author • Investing in locality and languages. relationships and by combining the physical There is a clear correlation between a strong publishing houses with innovation in the value local content catalogue and attractive cus- chain, creating an efficient yet high-quality tomer lifetime values. Storytel invests heavily publishing process. in local content and the local teams in order to attract and retain loyal customers. Storytel has • Focus on content. a proprietary catalogue of 20 languages, mak- Content is king and the commitment to cre- ing the Company well positioned to serve the ating and providing the best stories has made global community with stories in their mother it a priority to recruit a talented content and tongue wherever they are in the world. publishing team with a deep understanding of what customers want. That knowledge helps • Brand. Storytel focus on the titles that will give the Through widespread marketing Storytel is on highest return and lowest churn in the dif- track to become the number one audiobook ferent markets. In addition, Storytel has over company in the markets that the Company time developed strong and fruitful relation- operates in. The Storytel brand is currently be- ships with book publishers in all of the active ing broadened to include e-books to a further markets and can as a result secure highly extent. appreciated content for its platform. Another value-adding effect that Storytel’s presence Stakeholders and sustainability has on publishers is that the service can pre- work vent piracy and increases willingness to pay for premium digital content. Storytel has a strong Storytel has a global Code of Conduct that applies content team and the curators have a deep to all employees in all markets as well as consultants understanding of both stories and Storytel’s and board members. The Storytel Code of Conduct users. guides the employees of Storytel to make decisions that are sustainable for the organisation and that • Technological platform. will sustain the rapid growth of the firm over time, Storytel has developed a proprietary platform keeping ethical considerations in mind. Storytel is which enables the Company to scale in terms aware of its impact on the environment and care- of both new territories and also new subscrip- fully considers its various stakeholders in deci- tion types and products. By using customer be- sion-making processes. Minimising the use of paper haviour data, Storytel is in a strong position to and other consumables is one initiative. Reducing provide an excellent customer experience and business travel by encouraging virtual rather than create loyal and satisfied customers. physical meetings is another initiative.

5. The Storytel Group – Storytel´s competitive advantages 43 Overview of markets

Profitable: Scaling up: Preparation:

Sweden Netherlands India Denmark Poland UAE Norway Finland Bulgaria Iceland Russia Mexico Spain Singapore Turkey Brazil Italy

5. The Storytel Group – Overview of markets 44

6. Message from the CEO

It was a hot July in 2003, and I had made my way to the Apple store in Soho, New York, to buy my first iPod. A few hours later, I was in my hotel room fiddling with the manual, trying to connect my new device to iTunes. After a short struggle my iPod was live. There was only one problem, I didn’t have any content to put on it as my music library was sitting on a hard drive back in my house across the Atlantic Ocean. There and then I de- cided to buy my first digital product. The product I bought was an English audiobook, The King of Torts by John Grisham. In the evening I headed to Newark airport to catch my plane back to Europe. On the plane I browsed through the in-flight entertainment system but couldn’t find any movie I felt like watching on the 8-hour flight. I therefore decided to try start listening to my new audiobook on the iPod. In the morning I walked out the plane, having completed my book, and with one clear idea in my head. Quit my job, launch a business and be- come the king of audiobooks. In January 2005 my co-founder Jon Hauksson and I were up and running with our new audiobook venture.

Now 15 years later I still love audiobooks, and enjoy every moment of making the audiobook popular across the world. Our staff is amazing, we have so many talented people at Storytel who are contributing to the suc- cess. In my view every Storytel employee has a unique personality trait that makes them exceptional. We set high standards, in particular when it comes to integrity and long-term thinking. Storytel’s approach is one of sustainability by nature. The entire activity of reading and listening to books is one of sustainability, it takes long to read a book, and it has long term benefits not only for you as an individual, it visibly lowers your heart rate and provides peace of mind, but also educates and makes people smarter and more empathetic. In a world of temptation abundance via instant gratification, be it from attention given from social media friends, or TV shows that promote celebrities, or food packed with sugar, all these promote a kick-based lifestyle.

Storytel is a business with many facets, we provide work opportunities for culture workers like authors and actors around the world, we are a part of the start-up landscape, and the Internet economy, but we are also a clear actor within the culture establishment, in particular in Sweden as the owner of Sweden’s perhaps most prestigious book publishing house Norstedts. We provide a glimpse of the future and of high-tech to an oth- erwise traditional and conservative book industry. This is a fact that presents its challenges. As an incumbent book publisher, you still rely heavily on physical paper books, as a majority of your revenues still comes from these sales. The audiobook has presented the book industry with something novel, as it makes reading possi- ble in situations that were previously not considered for reading, like when driving a car or working out. This is why the industry has finally embraced the audiobook as a “good” format that can help secure the future rele- vance of the book.

What is harder for the industry to digest is the new business model, which is subscription-based, that Storytel introduced 12 years ago. This was, well before both Spotify and Netflix offered streaming services through subscriptions, although they made this model generally popular. As a consequence, when people subscribe for unlimited access to a catalogue, we no longer sell copies of books but rather access to a catalogue. And since the monthly subscription is access during a set time, what we really do now is to compete for people’s time, so the relevant parameter to track consumption is not in the form of sold copies but rather based on how much time subscribers spend reading on the Storytel service. This in combination introduced a revenue share model which is new to the industry and has taken us a long time to gain momentum for. In reality we still have a few book publishers across the world that resist this model and insists on getting paid a fixed price per book. But, this is slowly but surely changing.

Within the scope of what Storytel is working to accomplish sits a determination to connect authors with their readers. This is the long-term network effect that will come from our business, when a large number of readers connect with each other, making reading a more captivating activity where readers just like with tasty food long for more each and every day. When connecting authors with their readers the result becomes an author that understands better who their readers are and what purpose their stories play in their readers’ lives. This calls for better stories that entertain people even more. With the audiobook we introduce a third contributor to storytelling in the form of the narrator of the story, often times a trained actor. The author, reader and the narrator form a trinity that we at Storytel refer to as the Golden Triangle. The right story with the right voice to the right reader. We help the stories find their readers via a combination of intelligence and data driven match- ing of stories and readers with an expert based curation made by both internal and external experts under the firm guidance of our content managers in our local offices around the world. At Storytel we believe that recom- mending stories also requires an X-factor in the form of a human touch from a story loving curator.

6. Message from the CEO 45

As we now move our public listing to Nasdaq First North we enable international investors, including our staff across the world, to more easily trade in the Storytel stock and participate financially on our journey. We also anticipate reaching a larger pool of shareholders and better mirror our business as it grows into more territo- ries of the world. After more than 3 years in a public environment, with regular reporting and continuous in- vestor interactions, we feel well prepared for the Nasdaq First North environment. Our recent SEK 500 million capital raise gives us a solid cash position and a long-term perspective with regard to our internationalisation of the Storytel service and brand.

Our journey has just begun, next year we aim to have 1 million subscribers in more than 15 markets paying for our service every month. This is still a small number in a world with billions of people in hundreds of countries with one thing in common, they all love a great story. This is a fundamental human need, to place a chain of events into a context that when described well becomes a captivating story. This makes us feel secure and makes us learn faster and become smarter and, again, more empathetic. I believe that the world needs more empathy, and Storytel is there to promote that trait, today and tomorrow. Together with my amazing Storytel team I am ready to make storytelling and consumption of those stories a universal activity, easily accessible for anyone, wherever they are in the world.

Thank you for listening :)

Jonas Tellander, CEO & Founder Stockholm 3 December 2018

Her skal Kolunmetitel være 46 7. Financial overview The financial overview presented below regarding The interim report has not been reviewed or au- the financial year 1 January - 31 December 2017 dited by the Company’s auditor. No other informa- and financial comparative figures for the period 1 tion in the financial overview has been reviewed or January - 31 December 2016 have been derived audited by the Company’s auditor unless otherwise from the Group’s annual report for the financial year is explicitly stated. 2017. The financial information for the financial year 2017 has been audited by the Company’s auditor. The Group’s financial information for the finan- The financial overview also contains Storytel’s fi- cial year 1 January - 31 December 2017 and 1 nancial information for the interim period 1 January January - 31 December 2016 as well as for the in- - 30 September 2018, together with comparative terim periods 1 January - 30 September 2018 and financial information for the corresponding period 1 January - 30 September 2017, presented below, of the previous financial year. The financial infor- has been prepared in accordance with the Swedish mation for the interim 1 January - 30 September Annual Accounts Act (Sw. Årsredovisningslagen 2018 and 1 January - 30 September 2017 are de- (1995:1554)) and BFNAR 2012:1 Annual Reports rived from the Company’s published interim report. and Consolidated Financial Statements (K3).

7. Financial overview 47

Consolidated income statement

1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan –31 Dec 1 Jan –31 Dec SEK thousand 2018 2017 2017 2016

Net turnover 1,022,539 805,806 1,170,861 743,901

Change in inventories during production -2,502 -2,453 -1,049 -5,510

Share of profit from associates 0 -272 0 -951

Other operating income 16,055 15,978 29,401 13,555

Total turnover 1,036,092 819,059 1,199,213 750,995

Operating costs

Unit-sale costs -604,234 -480,210 -692,576 -431,937

Other external costs -351,421 -205,769 -308,022 -147,048

Personnel costs -199,676 -144,489 -207,378 -115,426

Depreciation and impairment of tangible and -49,115 -38,891 -55,659 -28,186 intangible non-current assets

Revaluation of previously owned participation 0 0 0 -648

Other operating costs -3,143 -1,364 -2,524 -2,250

Total operating costs -1,207,589 -870,724 -1,266,159 -725,495

Operating profit -171,497 -51,665 -66,946 25,500

Profit from financial items

Profit from participations in associates 44 -318 -29 755

Profit from other securities and receivables 0 -29 0 -269 held as non-current assets

Other interest income and similar profit/loss 3,302 2,598 3,647 1,506 items

Interest expense and similar profit/loss items -13,450 -13,504 -19,635 -6,943

Net financial items -10,104 -11,252 -16,017 -4,951

Profit after financial items -181,601 -62,917 -82,963 20,549

Profit before tax -181,601 -62,917 -82,963 20,549

Tax on profit for the year -688 -128 -1,271 -8,489

Deferred tax 4,421 2,845 12,104 11,425

Other tax 0 -1,329 -8 0

Profit for the period -177,868 -61,529 -72,138 23,484

Parent company’s share of profit for the year -177,868 -61,529 -72,138 23,484

7. Financial overview 48

Consolidated balance sheet statement

30 September 30 September 31 December 31 December SEK thousand 2018 2017 2017 2016

ASSETS

Non-current assets

Intangible non-current assets Capitalised expenses and similar work 37,150 45,204 43,367 54,752 Concessions, rights, licenses and brands 89,914 109,511 109,351 86,275 Tenancy rights and other rights 888 12 1,091 80 Goodwill 141,099 138,574 149,522 93,872 Advances relating to intangible non-current 1,482 942 1,062 1,221 assets

Total intangible non-current assets 270,533 294,244 304,393 236,200

Tangible non-current assets

Inventories, tools and installations 4,734 2,581 3,588 2,717 Construction in progress and advances re- 193 164 0 118 lating to tangible non-current assets

Total tangible non-current assets 4,927 2,745 3,588 2,835

Financial non-current assets

Participations in associates 2,073 1,990 2,029 10,648 Other non-current securities holdings 436 187 254 348 Deferred tax asset 13,384 9,767 14,635 14,166 Other non-current receivables 7,350 7,233 7,228 7,237

Total financial non-current assets 23,243 19,177 24,146 32,399

Total non-current assets 298,703 316,166 332,127 271,434

Current assets Inventories, etc. Work in progress 13,737 391 347 1,396 Finished goods and goods for sale 56,378 60,111 52,418 54,040 Work in progress on behalf of others 8,048 10,972 11,109 10,035 Advances to suppliers 0 0 1,757 0

Total inventories, etc. 78,162 71,474 65,631 65,471

Current receivables Trade receivables 137,548 131,340 158,490 138,149 Receivables in associates 11,885 7,600 4,220 4,197 Current tax receivables 11,738 7,015 11,304 2,897 Other receivables 30,516 23,245 12,320 23,199 Prepaid expenses and accrued income 162,412 124,863 114,355 89,385

Total current receivables 354,098 294,063 300,689 257,827

7. Financial overview 49

Current investments Other current investments 0 0 1 842 0

Cash and bank balances 652,445 281,594 249,132 129,561

Total current assets 1,084,705 647,131 617,294 452,859

TOTAL ASSETS 1,383,408 963,297 949,421 724,293

30 September 30 September 31 December 31 December SEK thousand 2018 2017 2017 2016

EQUITY AND LIABILITIES

Equity

Equity attributable to shareholders in parent company Share capital 27,933 25,755 25,759 23,924 Other contributed capital 856,544 370,185 370,699 136,881 Reserves 18,958 2,455 10,581 2,995 Retained earnings including profit for the year -241,335 -52,764 -63,466 8,672

Equity attributable to shareholders in parent 662,100 345,631 343,573 172,472 company

Total equity 662,100 345,631 343,573 172,472

Provisions Provisions for deferred tax 25,273 33,842 30,729 31,512

Other provisions 28,528 22,325 31,163 23,117

Total provisions 53,802 56,167 61,892 54,629

Non-current liabilities

Liabilities to credit institutions 209,698 138,447 127,962 151,268 Other liabilities 1,304 3,573 0 3,893

Total non-current liabilities 211,002 142,020 127,962 155,161

Current liabilities Liabilities to credit institutions 30,069 46,247 45,887 41,225 Advances from customers 1,829 1,740 2,291 1,365 Trade payables 100,705 87,045 97,067 75,734 Accumulated uninvoiced income 1,559 0 0 1,315 Liabilities to associates 5,942 3,803 0 2,100 Current tax liabilities 732 1,148 588 1,603

Other liabilities 44,004 48,931 42,777 44,267

Accrued expenses and deferred income 271,665 230,566 227,384 174,422

Total current liabilities 456,504 419,480 415,994 342,031

TOTAL EQUITY AND LIABILITIES 1,383,408 963,297 949,421 724,293

7. Financial overview 50 Consolidated cash flow statement

1 Jan - 30 1 Jan - 30 1 Jan –31 1 Jan –31 SEK thousand Sep 2018 Sep 2017 Dec 2017 Dec 2016

OPERATING ACTIVITIES

Profit after financial items -181,601 -62,917 -82,963 20,549

Adjustments for non-cash items, etc. 47,600 38,022 61,479 31,601

Tax paid -9,899 -3,672 -10,660 -1,481

Cash flow from operations before changes in -143,899 -28,568 -32,144 50,669 working capital

Cash flow from changes in working capital

Change in inventories and work in progress -17,861 12,023 20,088 15,333 Change in trade receivables 22,392 19,262 -6,826 -41,060 Change in current receivables -58,475 -28,985 -4,970 17,435 Change in trade payables 2,881 3,690 12,903 -24,153 Change in current liabilities 50,162 49,015 22,983 34,978

Cash flow from operating activities -144,800 26,437 12,034 53,202

Investment activities

Investments in intangible non-current assets -3,736 -10,089 -6,735 -6,274 Investments in tangible non-current assets -2,284 -712 -1,060 -452 Acquisition of subsidiaries 0 -59,093 -64,100 -203,617 Investments in financial non-current assets 1,843 0 -1,876 -455 Sale of financial non-current assets 0 8,068 6,905 0

Cash flow from investment activities -4,177 -61,826 -66,867 -210,798

Financing activities

New share issue 488,020 196,855 196,852 118,896 Loans raised 101,304 22,230 22,230 170,727 Amortisation of loans -36,730 -31,822 -43,054 -43,507

Cash flow from financing activities 552,593 187,263 176,028 246,116

Cash flow for the year 403,616 151,875 121,196 88,519

Cash and cash equivalents at beginning of year 249,132 129,561 129,561 41,495

Exchange rate difference in cash and cash equivalents -303 159 -1 625 -453

Cash and cash equivalents at year-end 652,445 281,594 249,132 129,561

7. Financial overview 51 The Group’s key financial performance measures

Certain descriptions of the key financial perfor- measures in the same way, these are not always mance measures below show development and comparable to those used by other companies. status of financial and equity-related performance These measures should therefore not be regarded measures that are not defined in accordance with as a compensation for measures that are defined in the Company’s accounting standards. These finan- defined in accordance with the Company’s account- cial performance measures provide valuable and ing standard. Below are the Group’s key financial complementary information to investors. Since all performance measures covering the period for the companies do not calculate financial performance financial overview.

1 Jan - 30 Sep 1 Jan - 30 Sep 1 Jan - 31 Dec 1 Jan - 31 Dec Group 2018 2017 2017 2016 Total turnover 1,036,092 819,059 1,170,861 743,900 Earnings before depreciation -122,381 -12,774 -11,287 53,686 Earnings before financial items -171,497 -51,665 -66,946 25,500 Operating margin -16.55% -6.31% -5.72% 3.43% Equity 662,100 345,631 343,573 172,472 Return on equity -44.35% -27.13% -24.15% 11.91% Equity-to-assets ratio 47.86% 35.88% 36.19% 23.81% Balance sheet total 1,383,408 963,297 949,421 724,293 Number of employees 369 281 309 164

Key financial performance measures for Streaming and Print Publishing

1 Oct - 31 1 Jul - 30 Sep 1 Apr - 30 1 Jan –31 1 Oct - 31 Dec 1 Jul - 30 SEK thousand Dec 2018 2018 June 2018 March 2018 2017 Sep 2017

Streaming total Forecast[32] Revenue 290,000 279,979 239,139 222,133 209,225 197,881 Contribution Profit 22,063 25,045 24,079 30,277 27,784 Contribution Margin 7.9% 10.5% 10.8% 14.5% 14.0% Paying Subscribers 765,000 720,900 621,200 577,900 533,400 503,900 ARPU (SEK/Month) 126 129 128 128 131 131

Streaming Sweden Revenue 137,500 135,986 125,759 122,046 118,038 113,709 Contribution Profit 40,888 35,763 43,067 38,501 32,872 Contribution Margin 30.1% 28.4% 35.3% 32.6% 28.9% Paying Subscribers 341,000 336,200 314,700 305,100 292,700 282,300 ARPU (SEK/Month) 134 135 133 133 134 134

Streaming International[33] Revenue 152,500 143,993 113,380 100,087 91,187 84,172 Contribution Profit -18,826 -10,718 -18,988 -8,224 -5,088 Contribution Margin -13.1% -9.5% -19.0% -9.0% -6.0% Paying Subscribers 424,000 384,700 306,500 272,800 240,700 221,600 ARPU (SEK/Month) 120 125 123 122 126 127

Print Publishing[34]

Revenue 116,252 115,898 106,312 173,832 132,619 Contribution Profit 40,140 41,889 39,223 66,854 47,905 Contribution Margin 34.5% 36.1% 36.9% 38.5% 36.1%

32 Forecast is an approximation based on information available at time of reporting. 33 Storytel Norway included in figures @ 100 percent. In the consolidated group accounts Norway is reported according to the principle of proportional consolidation. 34 Print Publishing refers to physical books. Internal transactions have been redacted. Barnens bokklubb not included in table.

7. Financial overview 52 52 Definitions of key financial performance measures

Operating margin (%)

Earnings before financial items divided by total turnover.

Return on equity (%)

Net income divided by average equity for the measurement period.

Equity-to-assets ratio (%)

Total equity divided by total assets.

Contribution profit (Streaming)

Contribution Profit is defined as streaming revenue minus costs for content (licensed content and in-house productions) and marketing. Storytel Reader is not included in Streaming.

Contribution profit (Print Publishing)

Contribution Profit is defined as revenue minus cost per sold unit, distribution costs, and sales and marketing costs.

Contribution margin

Contribution profit (as defined above) divided by total turnover.

Paying subscribers

Average number of paying subscribers in the quarter.

ARPU (SEK/Month)

Average Revenue per User (Subscriber) per month.

Her skal Kolunmetitel være 7. Financial overview 53 Period on period comparisons

Comparison between 1 January – 30 September 2018 and 1 January – 30 September 2017.

Turnover The total turnover for the nine-month period that ended 30 September 2018 amounted to SEK 1,036.1 million, compared with SEK 819.1 million in the corresponding period in 2017. The increased revenue was primarily driven by growth on current markets in the Streaming segment.

Operating profit The operating profit for the nine-month period that ended 30 September 2018 amounted to SEK -171.5 million compared with SEK -51.7 million in the corresponding period in 2017. The change was primarily driven by an increase in operating costs on new markets. While Storytel is profitable in Sweden, Denmark, Norway and Iceland, substantial investment in marketing and content in new markets are being made that will create value over time. During the first nine-month period in 2018 Storytel has launched in four new markets.

Net financial items The net financial items for the nine-month period that ended 30 September 2018 amounted to SEK -10.1 million, compared with SEK -11.3 million in the corresponding period in 2017. The change was primarily driven by higher interest income and a positive contribution from participations in associated companies.

Profit/loss for the period The loss for the nine-month period that ended 30 September 2018 amounted to SEK -177.9 million com- pared with SEK -61.5 million in the corresponding period in 2017.

Assets As of 30 September 2018, the total assets of the Company, amounted to SEK 1,383.4 million of which cash and bank balances and intangible assets amounted to SEK 652.4 million and SEK 270.5 million re- spectively. In comparison, as of 30 September 2017, the total assets of the Company amounted to SEK 963.3 million, of which cash and bank balances and intangible assets amounted to SEK 281.6 million and SEK 294.2 million respectively. The change in the Company’s asset base is primarily driven by the share issue of SEK 500.0 million in 2018.

Total equity As of 30 September 2018, total equity amounted to SEK 662.1 million, compared to SEK 345.6 million for the corresponding date in 2017. The change was primarily driven by increase in other contributed capital due to the share issue, partly offset by retained losses.

Liabilities As of 30 September 2018, the Company’s provisions amounted to SEK 53.8 million, non-current liabilities amounted to SEK 211.0 million, and current liabilities amounted to SEK 456.5 million, compared to SEK 56.2 million, SEK 142.0 million and SEK 419.5 million for the corresponding period in 2017. As for non-cur- rent liabilities, the main driver was increased liabilities to credit institutions and for current liabilities in- crease in accrued expenses and deferred income due to increased turnover.

Cash flow For the nine-month period ended 30 September 2018, the Company’s cash flow from operating activities amounted to SEK -144.8 million compared to SEK 26.4 million in the corresponding period of 2017. The change was primarily driven by the increased loss for the period.

For the nine-month period ended 30 September 2018, the Company’s cash flow from investing activities amounted to SEK -4.2 million compared to SEK -61.8 million in the corresponding period of 2017. The change was primarily driven by no major acquisitions in 2018. In 2017, the acquisition of Peoples Press A/S affected the cash flow from investing activities heavily.

7. Financial overview – Period on period comparisons 54

For the nine-month period ended 30 September 2018, the Company’s cash flow from financing activities amounted to SEK 552.6 million compared to SEK 187.3 million in the corresponding period of 2017. The change was primarily driven by the share issue and loan raised.

Comparison between 1 January – 31 December 2017 and 1 January – 31 December 2016.

Total turnover The total turnover for the full year 2017 amounted to SEK 1,199.2 million, compared with SEK 751.0 mil- lion in the corresponding period in 2016. The increased revenue was primarily driven by growth on cur- rent markets in the Streaming segment.

Operating profit The operating profit for the full year 2017 amounted to SEK -66.9 million compared with SEK 25.5 million in the corresponding period in 2016. The change was primarily driven by an increase in operating costs on new markets. While Storytel is profitable in Sweden, Denmark, Norway and Iceland, substantial investment in marketing and content in new markets are being made that will create value over time.

Net financial items The net financial items for the full year 2017 amounted to SEK -16.0 million, compared with SEK -5.0 mil- lion in the corresponding period in 2016. The change was primarily driven by costs related to interest ex- pense and unrealised fx effects.

Profit/loss for the year The loss before tax for the full year 2017 amounted to SEK -72.1 million, compared with a profit of SEK 23.5 million in the corresponding period in 2016.

Assets As of 31 December 2017, the total assets of the Company amounted to SEK 949.4 million, of which cash and bank balances and intangible assets amounted to SEK 249.1 million and SEK 304.4 million respec- tively. In comparison, as of 31 December 2016, the total assets of the Company amounted to SEK 724.3 million, of which cash and bank balances and intangible assets amounted to SEK 129.6 million and SEK 236.2 million respectively. The change in the Company’s asset base is primarily driven by share issues in 2017 and acquisitions in 2017.

Total equity The total equity 31 December 2017 amounted to SEK 343.6 million, compared to SEK 172.5 million for the corresponding date in 2016. The change was primarily driven by increase in other contributed capital due to share issues, partly offset by retained loss.

Liabilities As of 31 December 2017, the Company’s provisions amounted to SEK 61.9 million, non-current liabilities amounted to SEK 128.0 million, and current liabilities amounted to SEK 416.0 million, compared to SEK 54.6 million, SEK 155.2 million and SEK 342.0 million for the corresponding date in 2016. As for non-cur- rent liabilities the main driver was decreased liabilities to credit institutions and for current liabilities in- crease in accrued expenses and deferred income due to increased turnover.

Cash flow For the full year 2017, the Company’s cash flow from operating activities amounted to SEK 12.0 million compared to SEK 53.2 million in the corresponding period of 2016. The change was primarily driven by increased loss after financial items for the period.

For the full year 2017, the Company’s cash flow from investing activities amounted to SEK -66.9 million, compared to SEK -210.8 million in the corresponding period of 2016. The change was primarily driven by less acquisitions, where two larger acquisitions, Mofibo and Norstedts were both carried out in 2016.

7. Financial overview – Period on period comparisons 55

For the full year 2017, the Company’s cash flow from financing activities amounted to SEK 176.0 million, compared to SEK 246.1 million in the corresponding period of 2016. The change was primarily driven less loans raised during 2017.

Significant events after 30 September 2018 After the most recent quarterly report for the period 1 January – 30 September 2018 was published, the following significant events have occurred:

• The Company has launched its service in Mexico;

• The Company announced that they are preparing for launch in Brazil and Singapore;

• Norstedts completed the acquisition of Printz Publishing; and

• ECOFIN made a decision that will allow Sweden and other EU member states to reduce the VAT-rates of digital books to the VAT-rate applied for physical books. In Sweden, this means that the VAT rate might go down from 25 percent to 6 percent on digital books.

7. Financial overview – Period on period comparisons 56 Net indebtedness The Company’s net indebtedness as of 30 September 2018 is presented in the table below.

SEK million As of 30 September 2018

(A) Cash 652.4

(B) Cash equivalents

(C) Trading securities –

(D) Liquidity (A)+(B)+(C) 652.4

(E) Current financial receivables

(F) Current bank debt

(G) Current portion of non-current debt 30.1

(H) Other current financial debt

(I) Other current financial debt (F)+(G)+(H) 30.1

(J) Net current financial indebtedness (I)-(E)-(D) -622.3

(K) Non-current bank loans 211.0

(L) Bonds issued

(M) Other non-current financial debt

(N) Non-current financial indebtedness (K)+(L)+(M) 211.0

(O) Net financial indebtedness (J)+(N) -411.3

Working capital statement The Company believes that the existing working capital is sufficient to meet Storytel’s working capital and capital expenditure needs for at least the next 12 months as of the date of the Company Description.

7. Financial overview – Net indebtedness 57 8. Board of directors, executive management and auditor

Her skal Kolunmetitel være 58 Board of directors Storytel’s board of directors consists of seven board members, including the chair of the board, elected for a period until the date of the annual general meeting 2019. In accordance with Storytel’s articles of asso- ciation, the board shall consist of at least three and no more than eight board members and no more than eight deputy board members. The board members, their position, when they were elected and if they are independent in relation the Company and the executive management and in relation to major sharehold- ers are described in the table below.

Independent in relation to: The Company and Board executive Name Position member since management Major shareholders Rustan Panday Chair of the board 2015 No Yes

Jonas Tellander Board member and CEO 2015 No Yes

Board member and Karin Alexandersson 2015 No Yes employee representative

Nils Janse Board member 2015 Yes Yes

Jonas Sjögren Board member 2015 Yes No

Morten Qvist Strunge Board member 2018 No[35] Yes

Eva Swartz Grimaldi Board member 2018 No[36] Yes

35 Morten Qvist Strunge is currently not a part of the executive management in the Company. However Morten Qvist Strunge was part of the executive management until March 2018. 36 Eva Swartz Grimaldi is not part of the executive management in the Company. However, Eva Swartz Grimaldi is chair of the board of Norstedts Förlagsgrupp AB, a subsidiary to Storytel AB (publ).

Her skal Kolunmetitel være 59

Rustan Panday (born 1969) Jonas Tellander (born 1970)

Chair of the board since 2015 and was elected board mem- Founder of Storytel, board member and CEO since ber in Storytel Sweden AB in 2011 2015 and has been a board member since 2006 and CEO since 2005 in Storytel Sweden AB. Education/background: Rustan Panday has a broad experience and has worked with- Education/background: in the media sector for more than 20 years. Jonas Tellander is the founder of Storytel. He holds a MSc He is an entrepreneur and founder of Mediaplanet AB, a in Chemical Engineering from Lund University and a MBA media company with operations in 18 countries. from INSEAD. He has also worked as Head of global licens- ing at Roche. Current assignments: Chair of the board in Four potentials AB, GOTOPOTENTIALS Current assignments: AB, Storytel Sweden AB and Mofibo Sweden AB. Board Chair of the board in Barnbolaget i Örebro AB, Storytel member in Norstedts Förlagsgrupp AB, Norstedts Kartor AB, Publishing AB, Telegram Bokförlag AB and Earbooks AB. Böckernas Klubb med Journalen BKJ Aktiebolag, Gammafon Board member in Norstedts Förlagsgrupp AB, Kontentan Barnmedia Aktiebolag, Kartcentrum i Stockholm Aktiebolag, Förlags Aktiebolag, Insplanet AB (publ), Mofibo Sweden Kontentan Förlags Aktiebolag, Barnbolaget i Örebro AB, Je- AB, Storyside AB and Massolit Förlag AB. CEO and board hangir AB, Bed of Nails International AB, Rustan Panday AB, member in Tellander Holding AB and Storytel Sweden AB. Earbooks AB, Never Eat Alone Invest I AB and deputy board member in Omega Film AB. Ambassador for Hand in Hand. Previous assignment (last five years): Jonas Tellander has no previous assignments. Previous assignment (last five years): Chair of the board in Tellander Holding AB. Board member in Holdings in the Company: Mediaplanet International AB, Storyside AB, Whyshore AB, Jonas Tellander holds 5,000,000 class B shares in the Com- Storytel Publishing AB and Nangekri i Stockholm AB. pany and no other financial instruments in the Company.

Holdings in the Company: Rustan Panday holds 2,227,908 class B shares in the Compa- ny and no other financial instruments in the Company.

8. Board of directors 60

Karin Alexandersson (born 1973) Jonas Sjögren (born 1966)

Administrator in the expansion team since 2018, board Board member since 2015 and was elected board member and employee representative since 2015 member in Storytel Sweden AB in 2008

Education/background: Education/background: Karin Alexandersson holds a Bachelor’s Degree in Literature Jonas Sjögren holds a MSc in Electrical Engineering from from the University of Stockholm. She also holds a diploma Chalmers University of Technology and a MBA from INSEAD. in Worker’s Representative Board Work from PTK. Karin has He is also a Licensed Physician educated at the Sahlgrens- experience from the publishing industry from working as an ka Academy. He has also worked in various positions, as editor. Before joining the expansion team, Karin Alexanders- a System engineer and later as a manager for a product son was editorial and rights coordinator at Storytel’s subsidi- management department within mobile internet in Ericsson ary Massolit Förlagsgrupp AB. AB from 1991 to 2003 and as head of investments in Excea since 2004. Current assignments: Board member and employee representative in Storytel Current assignments: Publishing AB. Board member in Alligator Bioscience AB, Oblique Thera- peutics AB and CMC SPV of 3 April 2017 AB. Deputy board Previous assignment (last five years): member in Exceca Allocation AB and Delibr AB. Karin Alexandersson has no previous assignments. Previous assignment (last five years): Holdings in the Company: Board member in Orbit Esport AB, Storytel Sweden AB, Karin Alexandersson holds no shares or other financial instru- Tellander Holding AB, Omentum AB and Roxette Photo ments in the Company. NV. Deputy board member in Battleriff Gaming AB and Red Reserve AB.

Holdings in the Company: Jonas Sjögren holds 11,692,423 class B shares through his associated company Roxette Photo NV, and 12,893 class B shares that are owned privately, partly through a capital insurance and partly through a pension plan. Jonas has no other financial instruments in the Company.

8. Board of directors 61

Eva Swartz Grimaldi (born 1956) Nils Janse (born 1981)

Board member since 2018 Board member since 2015 and was elected board member in Storytel Sweden AB in 2013 Education/background: Eva Swartz Grimaldi has a vast experience within the Education/background: media sector. She has, among other things, been the Nils Janse holds a MSc in Industrial Engineering and CEO in Meter Film Television AB, director of programs Management from KTH Royal Institute of Technology in the TV4 group and CEO in the book publishing com- in Stockholm. Nils has experience from working as an pany Natur & Kultur. During 2007, she was appointed Engagement Manager at the consulting firm McKinsey. by the Swedish government to be in charge of the He is the CEO and founder of Delibr. commission on culture, which was finalised in a report in the spring of 2009. Since 2012, Eva Swartz Grimaldi Current assignments: has been conducting consulting services in her own CEO and chair of the board in Delibr AB. company Eva Swartz Grimaldi Consulting AB, which amongst other things includes acting as mentor for Previous assignment (last five years): younger female leaders. Board member in Tellander Holding AB and Storytel Sweden AB. Deputy board member in Trade Invent AB. Current assignments: Chair of the board in Norstedts Förlagsgrupp AB, Holdings in the Company: Michael Berglund AB, Doberman AB, Apotea AB, Eva Nils Janse holds 71,374 class B shares in the Company Swartz Grimaldi Consulting AB, Doberman Group AB and no other financial instruments in the Company. and Efevevmimanisa AB. Board member in Richard Swartz AB and Samhällsbyggnadsbolaget i Norden AB.

Previous assignment (last five years): Board member in Natur & Kultur Media i Stockholm AB, Sveriges Television Aktiebolag, Axiell Media AB, NOBEL MEDIA AB, Bianchi Café & Cycles Västerås AB, Bianchi Café & Cycles Stockholm AB and external CEO in Bian- chi Café & Cycles Sverige AB.

Holdings in the Company: Eva Swartz Grimaldi holds no shares or other financial instruments in the Company.

8. Board of directors 62

Morten Qvist Strunge (born 1986)

Board member since 2018

Education/background: Morten Qvist Strunge has an education from HHX Hillerød business school. Morten is an experienced en- trepreneur, investor and manager primarily within digital born subscription services, founding among others the Danish telco company Onfone and the subscription ser- vice for e-books and audiobooks Mofibo, which Storytel acquired in 2016. Morten has experience from manage- ment positions in various companies, such as, CEO in Onfone, VP in TDC A/S and CEO in Mofibo. He has also been the CCO of Storytel before becoming board member in 2018.

Current assignments: Board member in Investru ApS, Winefamly ApS, Good- iebox ApS, Tailor Shaped ApS, ApS, Ejendomsmægler Adam Schnack A/S, Blendle, Next advertising ApS, Rubberduck Car Care ApS, Mofibo books ApS and Peoples Press A/S. CEO and board member in Mofibo Sweden AB, Acc Holding ApS, New chapter ApS, Design by Strunge and Selskabet nr. 1 af 21 juni 2012.

Previous assignment (last five years): Founder and board member in Plenti ApS. Board member in Stronzo Brewing Co ApS, Agnes Cupcakes ApS and People’sPress A/S and CEO in Mofibo Books ApS.

Holdings in the Company: Morten Qvist Strunge holds 710,000 class B shares in the Company, through his wholly owned holding company New Chapter ApS, and no other financial instruments in the Company.

8. Board of directors 63 8.2 Manage- ment

Her skal Kolunmetitel være 64

The names of the people in executive management, their positions and year of appoint- ment are described in the table below.

Name Position Year of appointment Jonas Tellander CEO 2015

Sofie Zettergren CFO 2015

Märta Langéen COO ( parental leave ) 2017

Anna Lundström-Gars Interim COO 2018

Ingrid Bojner CCO 2018

Lotten Skeppstedt Head of Content 2018

Daniel Bodner CTO 2016

Martin Jonassen Head of Intelligence 2017

Rickard Henley Head of Publishing 2017

Stefan Tegenfalk Head of Expansion 2017

8.2 Management 65

Jonas Tellander (born 1970) Sofie Zettergren (born 1986)

Founder of Storytel, board member and CEO since 2015 CFO since 2015 and became the CFO in Storytel Sweden and has been board member since 2006 AB in 2013 and CEO since 2005 in Storytel Sweden AB. Education/background: For further information and a description of Jonas Tel- Sofie Zettergren holds a MSc in Economics from Uppsala lander, see section “Board of directors” above. University and has also studied at Singapore Manage- ment University. Before joining Storytel, she worked with auditing at Ernst & Young.

Current assignments: Board member in Storytel Publishing AB, Norstedts Förlagsgrupp AB, Kontentan Förlags Aktiebolag, Storytel Sweden AB, Telegram Bokförlag AB and Mofibo Sweden AB. Deputy board member in Massolit Förlag AB.

Previous assignment (last five years): External signatory of the company Tellander Holding AB.

Holdings in the Company: Sofie Zettergren holds 33,520 class B shares in the Com- pany and no other financial instruments in the Company.

8.2 Management 66

Märta Langéen (born 1983) Anna Lundström-Gars (born 1972)

COO since 2017 (parental leave) Interim COO since 2018

Education/background: Education/background: Märta Langéen holds a Master in Publishing from the Anna Lundström-Gars holds a LLM - Master of Law from the University of Stockholm. Märta has a background in the University of Stockholm. Anna has 15 years of experience publishing industry. She has been working at Storytel from working with digital content. Anna excels in the areas since 2011 in different roles, including Content Manager, of negotiations, business development, law, new media, tele- Operations Manager and Head of Operations in Sweden communications, people and project management. Before before becoming COO in 2017. joining Storytel, Anna was Head of Global Apps & VAS at Telia. Current assignments: Märta Langéen has no current assignments. Before joining Storytel, Anna was Head of Global Apps & VAS at Telia. Previous assignment (last five years): Märta Langéen has no previous assignments. Current assignments: Deputy board member in PerCima AB. Holdings in the Company: Märta Langéen holds 25,561 class B shares and no other Previous assignment (last five years): financial instruments in the Company. External signatory for the company utd. by content Nordics AB.

Holdings in the Company: Anna Lundström-Gars holds 850 class B shares in the Com- pany and no other financial instruments in the Company.

8.2 Management 67

Ingrid Bojner (born 1973) Lotten Skeppstedt (born 1984)

CCO since 2018 Head of Content since 2018

Education/background: Education/background: Ingrid Bojner holds a Master of Science in Business Admin- Lotten Skeppstedt hold a Master in Publishing and a Bache- istration from the Stockholm School of Economics (SSE) and lor’s Degree in Literature from the University of Stockholm. has studied at the MBA program at UCLA, US. Ingrid has Lotten previously worked in the management (Product Own- also undergone a chair of the board education at Michaël er and Country Manager Sweden) for Bonnier Books AB. Berglund and an executive leadership program at SSE ExEd. Ingrid has 12 years of experience from working at McKinsey Current assignments: & Company and left in 2010 as a Local Partner. She has also Board member in IT Project Skeppstedt AB. Deputy board been Vice President and Head of Sales at TeliaSonera, Depu- member in Lisen Skeppstedt Aktiebolag. ty CEO and CMO at the SSE ExEd and run her own company Dirgni Development. Previous assignment (last five years): Lotten has no previous assignments. Current assignments: Chair of the board in New Republic PR AB. Board member in Holdings in the Company: SWEMA AB, Swema Instrument Aktiebolag, Carnegie Invest- Lotten Skeppstedt holds 2,000 class B shares and no other ment Bank AB, Carnegie Holding AB, DHS Venture Partners financial instruments in the Company. AB, Zipreneur AB, Movestic Livförsäkring AB. Board member and CEO in Dirgni Development AB.

Previous assignment (last five years): Chair of the board in Sense Talents AB and Sense Talents Holding AB and Chair of the Board of Bambuser AB (publ). Board member in Celemiab International Aktiebolag, Storytel AB (publ), OSM Holding AB and Bee Urban Sweden AB. Ex- ternal vice CEO in Handelshögskolan i Stockholm Executive Education AB.

Holdings in the Company: Ingrid Bojner holds 11,000 class B shares and no other finan- cial instruments in the Company.

8.2 Management 68

Daniel Bodner (born 1984) Martin Jonassen (born 1977)

CTO since 2016 Head of Intelligence since 2017

Education/background: Education/background: Daniel Bodner holds a MSc in Computer Science from Martin Jonassen holds a BSc from Copenhagen Busi- the University of Innsbruck. Before joining Storytel he ness School. He has twelve years of experience from was working as a Software developer at Tezmo AB and 3 working with Data management, Modelling and Busi- Banken EDV. Daniel Bodner started working as a Software ness Intelligence in various companies and sectors, such developer at Storyte in 2012 and in 2015 he was appoint- as the companies YouSee, Berlingske Media and IUM ed Lead architect before becoming the CTO at Storytel in Nordic. Before joining Storytel Sweden AB, Martin Jon- 2016. assen worked with Business Intelligence and Analytics at Mofibo. Current assignments: CEO in Storytel GmbH. Before joining Storytel Sweden AB, Martin Jonassen worked with Business Intelligence and Analytics at Previous assignment (last five years): Mofibo. Daniel Bodner has no previous assignments. Current assignments: Holdings in the Company: Martin Jonassen has no current assignments. Daniel Bodner holds 18,258 class B shares in the Compa- ny and no other financial instruments in the Company. Previous assignment (last five years): Owner of MJSH Aps.

Holdings in the Company: Martin Jonassen holds no shares or other financial instruments in the Company.

8.2 Management 69

Rickard Henley (born 1974) Stefan Tegenfalk (born 1965)

Head of Publishing since 2017 Head of Expansion since 2017

Education/background: Education/background: Rickard Henley has studied literature at Stockholm Stefan Tegenfalk holds a school diploma in Tele and Tech- University and studied in a master class at Hyper Island. nology. Stefan is an entrepreneur and was part of starting Rickard has an extensive background in communication up Bredbandsbolaget after Bredbandsbolaget acquired his and storytelling, with an online focus since the dawn of company Telecyber. He also founded the publishing group Internet. He is experienced in leading digital transforma- Massolit Förlag. He has experience from working with tion in the communication/media area, both with business product development within the IT sector and currently has and content development. Areas of expertise include board engagements in different IT and media companies. online communication, digital publishing, format and Moreover, Stefan had his first novel published in 2009 and product development, service design, leading and facilitat- has since then written a number of books. Stefan has pre- ing creative teams and change management. Rickard has viously been CEO of Massolit Förlag AB and board member formerly been Head of Interactive Media within the TV4 in Storytel. media group. Current assignments: Current assignments: Chair of the board in Massolit Förlag AB and Fiber Access CEO and board member in Storytel Publishing AB and Sto- NP Management Intressenter AB. Board member in Omega ryside AB. External CEO in Kontentan Förlags Aktiebolag Film AB, Waystream AB, Waystream Holding AB (publ), and board member in Djurgårdsstaden media ekonomisk Steteg AB and Stefan Tegenfalk Invest AB. förening. Previous assignment (last five years): Previous assignment (last five years): Chair of the board in Storytel Publishing AB. Board member Head of Digital in the Swedish Educational Broadcasting in Storytel AB (publ) and Brafö AB. company (Sw. UR) and Norstedts Förlagsgrupp AB. Holdings in the Company: Holdings in the Company: Stefan Tegenfalk holds 2 class A shares and 344,494 class B Rickard Henley holds no shares or other financial instru- shares in the Company and no other financial instruments ments in the Company. in the Company.

8.2 Management 70

Other information about the Board of each board member and executive management directors and executive management representative, (ii) been convicted in fraud-related court cases, (iii) represented a company that has There are no family ties between any member of the been declared bankrupt or has entered into liquida- board of directors or the executive management. tion, (iv) apart from what is stated above, been the There are no conflicts of interest or potential con- subject of sanctions or accused by a public author- flicts of interest between the undertakings of the ity or organisation that represents a certain profes- board of directors and the executive management sional grouping and is governed via public sector in relation to the Company’s and the respective pri- law, or (iv) banned from taking part in business ac- vate interests of the board members and members tivities. of the executive management and/or other under- takings (however, several of the members of the All board members and the executive management board of directors and the executive management can be contacted via the Company’s main office (the have certain financial interests in Storytel due to address of which is specified on the last page in the their direct or indirect shareholding in the Company). Company Description). Anna Lundström-Gars was an external signatory for the company utd. by content Nordics AB during its Auditor liquidation and the following bankruptcy. Morten Qvist Strunge was a board member in the The Company’s auditor is Ernst & Young AB, with Danish companies Stronzo Brewing Co ApS and the authorised public accountant Alexander Agnes Cupcakes ApS that entered into bankruptcy Hagberg as auditor in charge. Alexander Hagberg is proceedings in May 2014 and July 2013, respec- an authorised public accountant and member of tively. FAR (the Swedish trade organisation for accounting consultants, auditors and advisors). Ernst & Young Except for what is previously stated, during the past AB and Alexander Hagberg can be contacted at five years, no member of the board of directors or Ernst & Young AB, Jakobsbergsgatan 24, Box 7850, the executive management have (i) been having any 111 44 Stockholm. other assignments other than those described for

8.2 Management 71 9. Corpo- rate gover- nance

Storytel is a Swedish public limited liability company. The Company has previously been listed at Spotlight Stock Market (previously known as AktieTorget) and prior to the listing on Nasdaq First North the Company’s corporate gov- ernance was based on Swedish law, internal rules and in- struction and Spotlight Stock Market’s rules for issuers. Once Storytel is listed on Nasdaq First North, the Company will also comply with Nasdaq First North Rule Book for Issuers. 9.1. General shareholders’ meeting

Her skal Kolunmetitel være 72

The general shareholders’ meetings are, in ac- dures and systems are in place for the evaluation of cordance with the Swedish Companies Act, the decided goals, continuously evaluating Storytel’s fi- highest decision-making body of the Company, nancial position and result, and evaluating the exec- and at the general meetings the shareholders ex- utive management. The board is also responsible for ercise their voting rights on key issues, including ensuring that the annual report, consolidated finan- inter alia decisions regarding adoption of income cial statements of the Group and interim reports are statements and balance sheets, allocation of the prepared on time. The board also appoints the CEO. Company’s results, discharge from liability for the The directors of the board are elected every year at board of directors and the CEO, election of direc- the AGM for the period until the end of the next tors of the board and auditor and remuneration to AGM. According to the Company’s articles of asso- the board of directors and auditor. In addition to ciation, the board of directors, insofar as it is elected the annual general meeting (“AGM”), extraordinary by the AGM, shall consist of at least three and no general shareholders’ meetings (“EGM”) may be more than eight board members and no more than convened. In accordance with Storytel’s articles eight deputy board members. of association, notice of the AGM and EGMs shall be made by announcement in the Official Swedish The chair of the board is elected by the AGM and Gazette and by posting the notice on Storytel’s has a specific responsibility to lead the board of di- website. An announcement that the notice has rectors’ work and shall ensure that the work is well been issued is published in Dagens Nyheter organised and carried out efficiently. The board of directors follows written rules of procedure, which Right to attend general shareholders’ meetings are revised annually and adopted by the inaugural meeting with the board of directors every year. All shareholders who are directly registered in the Among other matters, the rules of procedure stipu- share register, maintained by Euroclear Sweden AB late practices of the board of directors, functions (“Euroclear Sweden”) five week-days before the and the division of work between the directors of general shareholders’ meeting, and have notified the board and the CEOs and the established com- the Company of their intention to participate (in- mittees. In connection with the inaugural meeting cluding any assistants) at the general meeting, no with the board of directors, the board of directors later than on the date stated in the notice of the also establishes instructions for the financial report- general meeting, have the right to attend the gen- ing and the CEO. eral meeting and vote for the number of shares they hold. Shareholders may attend the general share- The board of directors hold meetings according to holders’ meeting in person or by proxy and may also an annual schedule established in advance. In addi- be accompanied by a maximum of two assistants. tion to these meetings, additional meetings can be Shareholders can normally register for the general convened to address issues which cannot be post- shareholders’ meetings in several different ways, as poned until the next scheduled meeting. In addition stated in the notice of the general meeting. to the board meetings, the chairman of the board and the CEO continuously discuss the management Shareholder initiatives of the Company. The board of directors of the Company currently consists of seven directors Shareholders who wish to have a matter addressed elected at the shareholders’ meeting, who are pre- at the general shareholders’ meeting must submit a sented in greater detail in the section ”Board of di- written request to the board of directors. The board rectors, executive management and auditor”. of directors must normally have received the re- quest no later than seven weeks before the general Internal control shareholders’ meeting. The board and the CEO’s responsibility for internal Board of directors control is governed by the Swedish Companies Act, the Swedish Annual Accounts Act, which requires The board of directors is the highest decision-mak- that information about the main features of the ing body following the general shareholders’ meet- Company’s system for internal control and risk man- ing and the Company’s highest executive body. In agement related to financial reporting each year accordance with the Swedish Companies Act, the must be included in the corporate governance re- board is responsible for the management and or- port, the rules of procedure for the board and in- ganisation of the Company, which means that the structions to the CEO as well as the instructions for board is responsible for, among other tasks, estab- the financial reporting. The board of directors is, lishing goals and strategies, ensuring that proce- amongst other things, responsible to ensure that

9. Corporate governance 73

the Company has sufficient internal control and for- Remuneration to the board of directors, malised routines to secure that established princi- CEO and other senior executives ples for financial reporting and internal control are followed and that there are effective systems in Fees and other remuneration to board members, in- place to monitor and control the Company’s opera- cluding the chair of the board, are decided at the an- tions and the risks associated with the Company’s nual general meeting. The annual general meeting business and operations. on 15 May 2018 resolved that a total fee of SEK 1,000,000 shall be paid to the board of directors, The overall purpose of the internal control is to, at out of which a fee of SEK 300,000 shall be paid to a reasonable degree, ensure that the Company’s op- the chair of the board and a fee of SEK 175,000 shall erating strategies and targets are monitored and be paid to other members of the board, excluding that the shareholders’ investments are protected. Storytel employees, for the period until the next an- Furthermore, the internal control is to ensure that nual general meeting. the external financial reporting, with reasonable certainty, is reliable and prepared in accordance Current employment contract for the CEO and with GAAP, that applicable laws and regulations are agreements with other senior executives followed and that the requirements imposed on listed companies are complied with. The CEO’s current employment contract stipulates a reciprocal period of notice of three months. For The Company has not established a separate inter- other Senior Executives, the reciprocal period of no- nal audit function, this task is instead performed by tice is either three or six months. No senior execu- the board of directors. tive has the right to severance pay in addition to sal- ary and benefits during the period of notice. Chief Executive Officer Auditing The CEO is appointed by the board and has the pri- mary responsibility for the day to day management The auditor is to review the Company’s annual re- of the Company and the daily operations. The divi- port and accounting as well as the management of sion of work between the board and the CEO is set the board and the CEO. Following each financial forth in the rules of procedure for the board and the year, the auditor is to submit an audit report and a instructions for the CEO. The CEO is also responsi- consolidated audit report to the annual general ble for preparing reports and compiling information meeting. from the executive management for the meetings with the board of directors and for presenting such In accordance with the Company’s articles of asso- materials at the meetings. According to the instruc- ciation, the Company shall have one auditor or reg- tions for financial reporting, the CEO is responsible istered audit firm. The Company’s auditor is Ernst & for the financial reporting of the Company and shall, Young AB, with authorised public accountant accordingly, ensure that the board of directors re- Alexander Hagberg as auditor in charge. Alexander ceives adequate information to enable the board of Hagberg is an authorised public accountant and directors to continuously evaluate Storytel’s finan- member of FAR (the Swedish trade organisation for cial position. accounting consultants, auditors and advisors). The The CEO must continuously keep the board of di- Company’s auditor is presented in greater detail in rectors informed of the development of Storytel’s the section ”Board of directors, executive manage- operations, the amount of sales, the Company’s fi- ment and auditor”. nancial position and result, the liquidity and credit situation, important business events and other cir- In 2017, remuneration of the Company’s auditor to- cumstances that cannot be presumed to have an in- talled SEK 2.8 million, of which SEK 1.9 million per- significant importance to the Company’s sharehold- tained to audit services related to the appointment ers for the board of directors to be aware of (such of auditor in Storytel and SEK 913,000 pertained to as material disputes, cancellation of agreements other consulting services. that are important to Storytel and significant cir- cumstances concerning Storytel’s facilities). The CEO and other senior executives are presented in greater detail in the section ”Board of directors, ex- ecutive management and auditor”.

9. Corporate governance 74

Remunerations in 2017

The table below presents an overview of the remuneration to the board members and the CEO in the financial year 2017.

Remuneration/ Variable Other Name Pension costs Total salary remuneration benefits

Board of directors

Jonas Tellander[37] – – – – –

[38] Ingrid Bojner 87,500 – – – 87,500

Stefan Tegenfalk[39] – – – – –

Rustan Panday[40] 705,745 144,876 – – 850,621

Nils Janse 87,500 – – – 87,500

Jonas Sjögren 87,500 – – – 87,500

Karin Alexandersson[41] 471,118 34,846 – – 505,964

Total remuneration to the board of directors 1,439,363 179,722 – – 1,619,085

Total remuneration to the CEO 1,861,280 239,952 – 102,287 2,203,519

Total remuneration to the management (excl. 5,908,223 1,768,032 – 3,801,308 11,477,563 CEO)[42] Total remuneration to the board of directors 10,648,229 2,367,428 – 3,903,595 16,919,252 and management

37 Eva Swartz Grimaldi is not part of the executive management in the Company. However, Eva Swartz Grimaldi is chair of the board of Norstedts Förlagsgrupp AB, a subsidiary to Storytel AB (publ). 38 Ingrid Bojner received remuneration in the capacity as board member in the Company during the financial year 2017. Ingrig Bojner is as of the date of the Company Description part of the executive management in the Company, for further information, see section “Board of directors, executive management and auditor – Executive management”. 39 Remuneration to Stefan Tegenfalk consists of salary that he received from his employment as Head of Expansion in the executive management, which is included in Total remuneration to the executive management. He has not received any remuneration as board member. 40 Remuneration to Rustan Panday consists of salary that he received as an employee of the Company. He has not received any remuneration as board member. 41 Remuneration to Karin Alexandersson consists of salary that she received as an employee of the Company. She has not received any remuneration as board member. 42 Stefan Tegenfalk, Sofie Zettergren, Daniel Bodner, Märta Langén, Rickard Henley, Martin Jonassen and Morten Qvist Strunge was part of the executive management during the financial year 2017.

9. Corporate governance – Remunerations in 2017 75 10. Share capital and ownership structure

General information Preferential rights to new shares According to the Company’s articles of association If the Company issues new shares, warrants or con- at the date of the Company Description, the share vertibles in a cash issue or a set-off issue, share- capital may not be less than SEK 15,000,000 and holders shall, as a general rule, have preferential not exceed SEK 60,000,000, and the number of rights to subscribe for such securities proportion- shares may not be less than 30,000,000 and not ex- ally to the number of shares held prior to the issue. ceed 120,000,000. As of the date of the Company Description, the Company’s registered share capital Dividends and dividend policy amounts to SEK 27,932,653.5 and there is a total of 55,865,307 shares outstanding in the Company, As of the date of the Company Description, Storytel where 635 are class A shares and 55,864,672 are have not paid any dividends since the Company was class B shares. The number of outstanding class A listed on Spotlight Stock Market and the Company’s shares is limited to 10,000 and 120,000,000 for board of directors has not adopted a dividend pol- class B shares. The shares are denominated in SEK icy. Decisions regarding dividends are made by the and each share has a quotient value of SEK 0.5. general meeting of shareholders and dividends are paid through Euroclear Sweden. All shareholders The shares in the Company have been issued in ac- who are registered in the share register maintained cordance with Swedish law. All issued shares are by Euroclear Sweden on the record date deter- fully paid and freely transferable. mined by the general meeting of shareholders are entitled to receive dividends. Dividends are nor- Certain rights associated with the shares mally paid as a cash amount per share, although they may also be paid in a form other than cash The rights associated with shares issued by the (cash-in-kind dividend). Dividends may only be paid Company, including those pursuant to the articles in an amount that ensures there is full coverage for of association, may only be amended in accordance the Company’s restricted equity after the dividend with the procedures stated in the Swedish is paid and provided that the dividend appears to be Companies Act (2005:551). justifiable taking into account (i) the demands placed on the size of the Company’s equity due to Voting rights the type of business conducted, its scope and risks, and (ii) the Company and the Group’s consolidation Each share of class A in the Company entitles the needs, liquidity and position in general. As a general holder to ten votes and each share of class B enti- rule, the shareholders are not permitted to decide tles the holder to one vote at general meetings of on dividends in an amount larger than that pro- shareholders. posed or approved by the board of directors.

10. Share capital and ownership structure 76

The right to dividends applies to shareholders who (P.O. Box 191, SE-101 23 Stockholm, Sweden). In are registered as shareholders in the share register accordance with the Swedish Financial Instruments maintained by Euroclear Sweden on the record date Accounts Act (Sw. lag (1998:1479) om värdepap- for dividends decided by the general meeting of perscentraler och kontoföring av finansiella instru- shareholders. Should a shareholder not be reached ment), Euroclear is the central securities depository through Euroclear Sweden, the shareholder will and clearing organisation for the shares. Accordingly, continue to have a claim against the Company con- no share certificates have been issued and any cerning the dividend amount and this is only limited share transfers are made electronically. All shares by rules concerning a ten-year statute of limitation. are fully paid and denominated in the currency SEK. After the period of limitation, the dividend amount The ISIN code for the Company’s class B shares is accrues to the Company. Neither the Swedish SE0007439443. Companies Act nor the Company’s articles of asso- ciation contain any restrictions regarding the right Convertibles, warrants, authorisation to to dividends for shareholders outside Sweden. issues securities, etc. Apart from the restrictions pursuant to banking and clearing systems, payments to such shareholders As of the date of this Company Description, the are made in the same manner as those made to Company has no outstanding warrants, convert- shareholders domiciled in Sweden. Shareholders ibles or other financial instruments. who are not subject to taxation in Sweden are nor- mally subject to Swedish withholding tax. Refer to Share capital trend the section “Tax considerations in Sweden”. The following table shows the share capital trend Central securities depository for the Company’s share capital during the years covered by the financial overview. The Company’s shares are issued in dematerialised form through the services of Euroclear Sweden

Change in number of class Change in share Total number of Total share capi- Date Event B shares capital (SEK) shares tal (SEK)

55,864,672 class 5 October 2018 Share issue 4,348,000 2,174,000 B shares 635 27,932,653 class A shares

51,516,672 class 18 October 2017 Set-off issue 7,267 3,633 B shares 635 25,758,653 class A shares

51,509,405 class 15 September Share issue 3,000,000 1,500,000 B shares 635 25,755,020 2017 class A shares

48,509,405 class 7 April 2017 Set-off issue 662,857 331 428 B shares 635 24,255,020 class A shares

47,846,548 class 18 October 2016 Share issue 2,500,000 1 250 000 B shares 635 23,923,591 class A shares

45,346,548 class 16 June 2016 Share issue 650,000 325,000 B shares 635 22,673,591 class A shares

44,696,548 class 31 May 2016 Set-off issue 879,121 439,560 B shares 635 22,348,591 class A shares

10. Share capital and ownership structure 77

Ownership structure

The Company’s largest shareholders with shareholdings over five percent of the total shares in the Company as of 31 October 2018 and known changes thereafter, are listed below.

Number of A Number of B Percent of share Shareholder shares shares capital Roxette Photo NV – 11,692,423 20.93

Jonas Tellander – 5,000,000 8.95

Handelsbanken Fonder – 5,254,796 9.41

Swedbank Robur Fonder – 4,045,932 7.25

Annamaria Tellander – 3,192,264 5.71

Total largest sharefolders 0 29,185,415 52.24

Other sharefolders 635 26,679,892 47.76

Total 635 55,865,307 100.0

10. Share capital and ownership structure 78 11. Articles of association

BOLAGSORDNING ORG. NR. 556575-2960

This is an unofficial in-house translation. In case of any discrepancy, the Swedish text shall prevail.

§ 1 Company name The name of the company is Storytel AB (publ)

§ 2 Registered officee The registered office of the company shall be in Stockholm.

§ 3 Object of the company The company’s object is to carry out (i) publishing activities, (ii) writing and other cultural activities, (iii) acquisition and licensing of rights, and (iv) consulting activities within publishing, film and other cultural activities, (v) publishing activities through production and sale of audiobooks and to conduct activities related to the aforementioned. Inad- dition, the company shall own and manage shares and to conduct activities related to the aforementioned.

§ 4 Fiscal years The company’s fiscal year shall besa 1 January - 31 December.

§ 5 Share capital and number of shares The share capital shall be at least SEK 15,000,000 and no more than SEK 60,000,000. The number of shares shall be at least 30,000,000 and no more than 120,000,000. The company may issue shares of two classes, class A and class B. Class A shares shall entitle to ten votes and class B shares shall entitle to one vote. No more than 10,000 class A shares and no more than 120,000,000 class B shares can be issued.

§ 6 Shareholders’ rights in connection with increases of the share capital If the company decides to issue new class A and B shares through a cash issue or a set-off issue, the owners of class A and B shares shall have preferential right to subscribe for new shares of the same classes in proportion to the num- ber of shares they already hold (primary preferential right). Shares not subscribed with the primary preferential right shall be offered to all shareholders (subsidiary preferential right). If the shares offered are insufficient for subscrip- tion based on subsidiary preferential rights, the shares shall be distributed in proportion to the number of shares the shareholders already own, to the extent that this is not possible, by drawing of lots. If the company decides to offer new shares of only one class of shares through a cash issue or a set-off issue, all shareholders, regardless of whether their shares are of class A or class B, shall have preferential right to subscribe for new shares in proportion to the number of shares that they already hold. If the company decides to issue warrants or convertibles against cash or set-off of claim, the shareholders have a preferential right to subscribe for warrants as though the issue concerned those shares which might be subscribed for on account of the warrant and a preferential right to subscribe for convertibles as though the issue concerned those shares which the convertibles may be exchanged to, respectively. The above shall not imply any restriction in the possibility to decide on a new share issue against cash or set-off of claim, with derogation from the shareholders’ preferential right. If the share capital is raised through a bonus issue, new shares of each class shall be issued in relation to the num- ber of pre-existing shares of the same class. In that connection, old shares of a certain class of shares shall entail a right to new shares of the same class of shares. The above shall not imply any restriction in the possibility to carry out a bonus issue and, after necessary change in the articles of association, issue new shares of a new class.

11. Articles of association 79

§ 7 Conversion of a share class Owners of class A shares may demand to have its shares converted into class B shares. Such request of conversion shall be made in writing to the board of directors and state the number of shares to be converted. The company shall immediately submit a notification to register the conversion. The conversion is executed at the time of regis- tration.

§ 8 Board members and and deputy board members The board of directors shall consist of at least three and no more than eight board members with no more than eight deputy board members. An appointment as a board member or deputy board member is valid until the first annual general meeting held after the year that the board member or deputy member was elected.

§ 9 Auditor For review of the company’s annual report and bookkeeping as well as the management pursued by the board of di- rectors and the managing director, one or two auditors with no more than two deputy auditors are to be appointed.

§ 10 Convening of a general meetinga Notice of general meetings shall be made by announcement in the Swedish Official Gazette and by posting the notice on the company’s website. At the time of the notice, an announcement with information that the notice has been issued shall be published in Dagens Nyheter.

§ 11 Right to attendance at general meetingsta A shareholder that wishes to participate in a general meeting must be recorded in a printout or other transcript of the share register as of five weekdays before the meeting, and notify the company no later than 12 am on the date stated in the notice of the meeting. Such a date may not be a Sunday, other public holiday, Saturday, Midsummer Eve, Christmas Eve or New Year’s Eve and may not occur earlier than the fifth weekday prior to the general meeting.

A person who is not a shareholder of the company shall, on the terms decided by the board of directors, have the right to attend or in any other way be able to monitor the decisions taken on general meetings.

§ 12 Matters of the annual general meeting At the annual general meeting, the following matters shall be considered:

1. Opening of the meeting 2. Election of chair of the meeting 3. Election of one or more persons to certify the minutes 4. Preparation and approval of the voting list 5. Approval of the proposed agenda 6. Examination of whether the meeting has been properly convened 7. Presentation of the annual report and auditor’s report and, if any, the consolidated annual report and the auditor’s statement regarding the consolidated annual report 8. Resolutions regarding; a) adoption of the income statement and the balance sheet and, if any, the group income statement and the group balance sheet. b) the profit or loss of the company in accordance with the adopted balance sheet. c) discharge from liability for the members of the board and the managing director,

9. Determination of the fees for the members of the board of directors and the auditor(s) 10. Determination of the number of board members and deputy board members, election of members of the board of directors and deputy board members, and at the end of each auditor’s mandate period, election of the auditor(s) and possible deputy auditor(s)

§ 13 Central securities depository registration The company’s shares shall be registered in a central securities depository register in accordance with the Central Securities Depositories and Financial Instruments Accounts Act (SFS 1998:1479).

These articles of association were adopted at the extraordinary general meeting on 24 July 2015.

11. Articles of association 80 12. Legal considerations and supplementary information

Her skal Kolunmetitel være 81 Storytel Group structure

Storytel Group Structure October 2018

Storytel AB (publ) 556575-2960

100% 100% 100% 100% 100% 100%

Storytel Publishing AB Massolit Förlag AB Storytel AG Omega Film AB People´s Press A/S Norstedts Förlagsgrupp AB 556045-0297 556676-0046 CHE-112.413.562 556240-5059 26608694 51% 556045-7748 bog.nu 33376529

100% 50% 100% 100% 100% 100% 100% 100% 100% Norstedts Gammafon Kartcentrum i Printz Storytel NL BV Storytel A.S Storytel A/S Storytel Böckernas klubb Kartor AB Barnmedia AB Stockholm AB Publishing AB 582.16.111 913211421 35207600 Sweden AB 556317-0629 556696-2865 556532-7540 556367-7946 556468-5575 556828-0043

100% 100% Storytel Publishing NL B.V. Barnens Bokklubb AB 620.57.707 556103-0445

99,84% 100% 100% 100% 100% 99% 100% 100% 100% Storyside Storytel Sp.z.oo Storytel RU Storytel Storyside AB Storytel S.L Mofibo Books ApS Storytel OY Storytel GmbH India LLP 36273911 114784713 Italy S.r.l. 556630-2906 B66996729 35228691 2792250-7 FN 439493p AAH-6929 CDB 7020 10127220969

100% Mofibo Sweden AB 556977-0166

99,9% 100% 100% 100% Storytel Turkey Storytel Latin Storytel Storytel Bulgaria Yayıncılık Hizmetleri America S.de R.L de C.V Iceland EHF EEOD A.S. SLA180523RI3 570504-3040 202130119 35728/5 100% 99,9% Storytel Arabia FC Storytel Servicios LLC S.de R.L de C.V 31206 53023 SSE 1805236MA 100% 100% 100% 100%

Earbooks AB Telegram Kontentan Barnbolaget i 556938-3762 Bokförlag AB Förlags AB Örebro AB 556782-9303 556502-7447 556677-2611

12. Storytel Group structure 82 Material agreements Content and distribution agreements with UK and US publishers of e-books and audiobooks Agreements - Streaming Storytel has entered into agreements with a number of UK and US publishing companies, which holds Subscription agreements with customers the rights to e-books and audiobook titles for the international market. The agreements enable The subscription agreements entered into with Storytel to provide these publishing companies’ Storytel’s customers are fundamental to enable content in the Company’s service in certain geo- profitability for the streaming division and to the graphical markets and to provide a variety and pre- Group as a whole. Storytel’s current subscriptions mium content to Storytel’s subscription customers. give the subscribers right to stream an unlimited Storytel receives a non-exclusive right to distribute, number of digital books through the Storytel ser- market and promote the content provided by these vice, which can be accessed via mobile phones, tab- publishing companies. Storytel has to pay royalties lets or other devices compatible with the service for each listening of content made available through such as the Storytel Reader. The customer pays a a Storytel subscription plan. The agreements are fixed subscription fee to Storytel each month in ad- valid for one to two years and can be terminated by vance. The subscription is valid until further notice either party with 30 days’ prior written notice. and the customer has right to terminate the agree- ment at any time with effect as of the next thir- Agreement with Adyen ty-day payment cycle. In 2015, Storytel entered into an agreement with Telia Adyen. Adyen provides a payment platform which can handle various payment solutions (e.g. pay- Storytel has entered into a cooperation agreement ments from different credit card providers and bank with Telia regarding providing Storytel’s technical transfer solution providers) to Storytel. The agree- platform for digital distribution of audiobooks to ment contains the terms and conditions for the ser- Telia for the purpose of providing value added ser- vices that Adyen shall provide to Storytel which, in- vices to Telia’s customers. Telia receives a right, in ter alia, includes handling of transactions between certain territories to distribute, market, bundle and Storytel and its customers for monthly subscription sell Storytel subscriptions. Telia shall pay Storytel payments and handling of settlements of the trans- the monthly fees for bundled months and receives actions with the credit card companies/banks and in return a remuneration per subscriber. The agree- the customers’ banks. Once the payments have ment is automatically renewed for two years at a been settled, Adyen transfers the amounts to time and can be terminated by either party with Storytel. Storytel’s customer service personnel also three months’ prior written notice. uses Adyen services to track and perform repay- ments to Storytel’s customers. Adyen charges a pro- Content and distribution agreements with non-UK cessing fee for each payment transaction. The fee and non-US publishers of e-books and audiobooks for each transaction is set in accordance with a fee table with different fee levels depending on the Storytel has entered into several agreements with number of transactions that are processed by Adyen non-UK and non-US publishers of which some are each month. The agreement is valid until further no- market leaders. This enables Storytel to make the tice and can be terminated with two months’ prior publishers’ content available to be streamed through written notice. the service provided by Storytel, which is important to provide a variety and premium content to sub- Joint Venture Norway scribing customers. Storytel shall pay the publishers . royalties for each listening of content made avail- The Company’s wholly owned subsidiary Storytel able through a Storytel subscription plan. The agree- AG has entered into a joint venture with the ments are valid for one to two years from the date Norwegian publisher Cappelen Damm where each of signing unless earlier terminated. After that pe- of the said shareholders own 50 percent of the out- riod, the agreements will continue to be in force standing shares in Storytel AS. Storytel AS has been without further notice and with six to 12 months’ set up to combine Storytel’s tech platform with prior written notice of termination. Cappelen Damm’s content, for the purpose of pro- viding the Storytel product to customers in Norway. The joint venture consists of i) a shareholders’ agree-

12. Legal considerations and supplementary information – Material agreements 83

ment between Storytel AG and Cappelen Damm, The services agreement is valid until 28 February governing certain matters concerning their joint 2019, and after that period, the agreement is auto- ownership of Storytel AS, which is valid until Storytel matically renewed for one year at a time if it is not AS is sold, merged into another entity, winded up or terminated by either party with six months’ notice listed on a stock market; ii) a license agreement pur- of termination before the period(s) for agreement suant to which Storytel Sweden AB grants Storytel expiration. AS a right to use Storytel’s platform, which is valid until 31 December 2018 and after that the agree- Agreements with retail partners for sale of books ment is automatically renewed for one-year periods to end-customers until terminated by either party with 6 months’ prior written notice to 31 December of any calendar year Norstedts has entered into a number of material ; and iii) a distribution agreement between Storytel agreements with retails partners (“Retail Partners”) AS and Cappelen Damm pursuant to which Storytel for sale of books to end-customers in Sweden. The AS is granted access to Cappelen Damm’s content, agreements regulate the terms and conditions for which is valid until further notice with six months’ sale of Norstedts’ books to end-customers, includ- notice of termination. ing terms and conditions regulating ordering vol- ume discounts and sale target bonuses for the Retail Agreements - Print Publishing Partners and marketing support from Norstedts. The agreements are automatically renewed until Agreements with authors further notice with three to six months’ notice of termination. Norstedts is a major print publishing company in Sweden and has as such entered into a vast number Marketing agreements of agreements with authors regarding the exclusive right for Norstedts to publish a title or volume of a Storytel has entered into a number of agreements book which has been written or is about to be writ- with companies for marketing in their channels and/ ten. The agreements for coming publications enti- or on their platforms, e.g. in TV, radio, digital and tles the author an upfront payment, a percentage of print. A big part of Storytel’s operations is dependent sales from the book together with royalties. on being able to market its products and service to retain and attract customers. As examples of digital Distribution agreement and services agreements marketing, Storytel uses Google Ads and Facebook with Speed Logistics i Stockholm AB Ads to advertise. Google Ads reaches out to users of Google Search and Google’s search partners, who Norstedts has entered into a distribution agree- visit Google Play Store or browse YouTube or any ment and a services agreement with Speed Logistics of the apps and websites included in the Google i Stockholm AB (formerly Samdistribution Logistik network. Facebooks Ads gives Storytel the right to Sverige AB) (“Speed Logistics”) in which Speed advertise on Facebook, Instagram, as well as users Logistics shall handle the logistics, including storage of any of the apps and websites in Facebook’s net- management and distribution of physical items and work. Storytel may also advertise to users of other products and customer service and the sales ledger products that are included in, or added to Google’s for Norstedts. The agreements are necessary to and/or Facebook’s advertising ecosystems. The ad- handle the logistics and distribution of Norstedts’ vertisements are targeted based on e.g. keywords, books to retail partners and thereby enable sale of interests, demographics and behaviour. The agree- books to end-customers. ments are standardised for each marketing channel with updated terms for each year. The distribution agreement gives Speed Logistics an exclusive right to handle the services for five years Acquisitions agreements from the date of distribution of the articles to the storage facility and from 1 July 2016 at the latest. Streaming - Acquisition of companies in Bulgaria, The agreement is valid until 30 June 2021. After that Turkey and Iceland period, the agreement is automatically renewed for one year at a time if it is not terminated by either In 2017, Storytel acquired 100 percent of the shares party with nine months’ notice of termination be- in the Bulgarian company D&D Factory EOOD fore the period(s) for agreement expiration. (“D&D Factory”), the Turkish company Seslenenkitap Yayıncılık Hizmetleri A.Ş (“Seslenenkitap”) and the Icelandic company Skynjun EHF (“Skynjun”) to es-

12. Legal considerations and supplementary information 84

tablish Storytel’s operations and service in respec- term, the lease is automatically extended by one tive country. Storytel paid an initial purchase price year at a time. in cash for the acquisitions of D&D Factory and Seslenenkitap. The initial purchase price for Skynjun Disputes was paid with shares in Storytel by a directed share issue. The aggregated initial purchase price for the Storytel’s subsidiary People’sPress has filed a noti- three acquisitions amounted to approximately EUR fication with the Danish Data Protection Agency in 0.47 million. An additional purchase price might be- connection with a data breach in the Spanish com- come payable after 24 months, 36 months and by pany Typeform S.L (“Typeform”). In 2017, Typeform the end of 2019, respectively, if certain objectives provided quiz game services to People’sPress. have been reached in accordance with a perfor- These quiz games required the user to register its mance based earn-out model. These objectives are email address, which were processed and stored mainly related to financial performances, based on on Typeform’s servers. On 3 May 2018 (before the sales and production targets. Storytel can choose GDPR regulation entered into force, i.e. before 25 to pay each additional purchase price in cash or by May 2018), Typeform’s servers were hacked and an optional issuance of shares in Storytel. The maxi- approximately 330 email addresses were compro- mum aggregated amount payable as additional pur- mised. People’sPress received information of the chase price for these acquisitions amounts to ap- data breach from Typeform on 29 June 2018 and proximately EUR 2.6 million. People’sPress reported the data breach on 3 July 2018 to the Danish Data Protection Agency. At the Print Publishing - Acquisition of Norstedts time of the data breach, People’sPress had no com- mercial relationship with Typeform, had not pro- In 2016, Storytel acquired the Norstedts group, the cessed or handled the compromised data and were second largest publishing house in Sweden. The of the understanding that the personal data had acquisition was financed through a SEK 110 million been deleted, as the agreement with Typeform ex- bank loan, a SEK 40 million bridge loan and SEK 2 mil- pired on 7 December 2017. As of the date of the lion in own funds. The purchase included Norstedts’ Company Description, the matter is still pending the wholly owned subsidiaries Böckernas Klubb, review of the Danish Data Protection Agency. Norstedts Kartor AB, Kartcentrum i Stockholm AB and Gammafon Barnmedia AB, as well as, own- Apart from what has been described above, Storytel ership in the companies Barnens Bokklubb AB, has not been party to any legal proceedings or arbi- Pocketförlaget Sverige AB, Elib AB, Månadens Bok tration proceedings (including any unsettled cases HB and Bokinfo Norden KB. or any cases that the Company knows may arise) during the past 12 months that have had, or could Lease agreement have, a material impact on the Company’s financial position or profitability. AFA Fastigheter Intellectual property rights Storytel leases office premises located on the property Gråmunkeholmen 4 with address Norra Trademarks Riddarholmshamnen 1 in Stockholm. The lease is entered between Norstedts as the tenant and AFA Storytel and its subsidiaries, together holds of ap- Sjukförsäkringsaktiebolag (“AFA”) as the landlord. proximately 100 trademark registrations and appli- The parties have entered into a new lease agreement cations around the world providing a trademark regarding the premises with effect as per 1 January protection for amongst other the STORYTEL word 2019, which will replace the current lease agree- and logo. The majority of the trademark registra- ment. The lease period expires on 30 September tions and applications are held by Storytel Sweden 2026 and unless terminated nine months prior to AB, while the ownership of the other trademark reg- the end of each term, the lease is automatically ex- istrations and applications are split between Storytel tended by three years at a time. Norstedts sub- Publishing AB, StorySide and Norstedts. leases, as a landlord, a part of the office to Storytel Sweden AB as the subtenant. The lease period for Domain names this sublease expires on 31 May 2020 and unless terminated nine months prior to the end of each Storytel and its subsidiaries has approximately 180 registered domain names. About half of the do-

12. Legal considerations and supplementary information 85

mains are held by Storytel Sweden AB and relate to • Rustan Panday’s employment level is 25 per- the word “Storytel”, with or without additional cent. Rustan shall also receive SEK 300,000 words, registered on the most common top-level as remuneration for his work as Chair of the domains, such as .com and .net, and on several na- Board during the fiscal year 2018 in accordance tional top-level domains for different countries, with a decision taken at the Company’s annual such as .se, .no, .us, .es, .pl, etc. general meeting on 15 May 2018. The other half of the domains are held by Norstedts and relate to the word “Norstedts”, with or without • Karin Alexandersson is employed as adminis- additional words, and Norstedts other trademarks, trator in the expansion team with an employ- registered on the most common top level domains, ment level of 100 percent. such as .com and .net, and on .se. Eva Swartz Grimaldi is the Chair of the Board in Insurance Norstedts Förlagsgrupp AB and receives a yearly remuneration of SEK 50,000. Furthermore, Eva The Company has a property damage and business Swartz Grimaldi has a consultancy agreement with interruption insurance including loss of property Norstedts according to which she is allowed to in- damages and business interruption in the Company’s voice up to SEK 275,000 per year to cover the oper- facilities. Furthermore, Storytel has insurance ational improvements and management work that against media liability including a protection against she performs, which is not covered within her role negligence in the Company’s own media content, as Chair of the Board.* general liability and product liability insurance that includes protection against claims from third par- Karin Alexandersson’s husband is hired by the ties, legal aid insurance covering legal fees in civil Company for translation services on a consulting trials, crime insurance that covers the Company basis. He has invoiced the Company an amount of against losses arising from criminal acts up to an SEK 36,520 in 2017. amount of SEK 10 million and a director and officer insurance. In addition, the Company has insurance Apart from what has been described above, no policies for liability relating to personnel, accidents other transactions between board members or and accidental death of personnel, crime against other related parties and subsidiaries occurred property, fire, water damage and business travels. during the period from 1 January 2018 up to the Storytel assesses that its insurance coverage is sat- publication date of the Company Description. isfactory in respect to the nature and extent of the business. However, there is no guarantee that Certificate of publication Storytel will not suffer losses not covered by insur- ances. In order to publish a periodical in Sweden, a certificate of publication is needed in accor- Transactions with related parties dance with the Freedom of the Press Act (Sw. Tryckfrihetsförordningen). The requirement of a Related parties refer to all subsidiaries in the Group certificate of publication also means the period- and senior executives in the Group, meaning the ical is covered by the rules regarding freedom of board of directors and executive management, and the press. Storytel, through its subsidiaries, holds a members of their families. The following transac- number certificates of publication that covers their tions have been made with related parties. All trans- operations. actions with related parties have been carried out at arm’s length. Certified Adviser

The following board members are also employed by Storytel’s Certified Adviser is FNCA Sweden AB. the Company and receive salary: FNCA Sweden AB does not own any shares in the Company. • Jonas Tellander is employed as CEO in the Company with an, employment level of 100 percent.

12. Legal considerations and supplementary information 86 13.Tax considerations in Sweden

Below is a summary of certain Swedish tax issues related to the Offering and the admission for trading of the shares in the Company on Nasdaq First North for private individuals and limited liability companies that are residents of Sweden for tax purposes, unless otherwise stated. The summary is based on current legislation and is intended to provide general information only regarding the shares in the Company as from the admission for trading on Nasdaq First North.

The summary does not cover:

• situations where shares are held as current assets in business operations; • situations where shares are held by a limited partnership or a partnership; • the special rules regarding tax-free capital gains (including non-deductible capital losses) and dividends that may be applicable when the investor holds shares in the Company that are deemed to be held for business purposes (for tax purposes); • the special rules which in certain cases may be applicable to shares in companies which are or have been so-called close companies or to shares acquired by means of such shares; • the special rules that may be applicable to private individuals who make or reverse a so-called in vestor deduction (Sw. investeraravdrag); • foreign companies conducting business through a permanent establishment in Sweden; or • foreign companies that have been Swedish companies.

Further, special tax rules apply to certain categories of companies. The tax consequences for each individ- ual shareholder depend to some extent on the holder’s particular circumstances. Each shareholder is ad- vised to consult an independent tax advisor as to the tax consequences that could arise from the Offering and the admission for trading of the shares in the Company on Nasdaq First North, in- cluding the applicability and effect of foreign tax legislation (including regulations) and provisions in tax treaties for the avoidance of double taxation.

Private individuals

For private individuals resident in Sweden for tax purposes, capital income such as interest income, divi- dends and capital gains is taxed in the capital income category. The tax rate in the capital income category is 30 percent. Capital gains or losses equal the difference between the proceeds, after reduction for sales costs, and the purchase price. The aggregate purchase price for all shares of the same kind and class is di- vided on the number of shares. As an alternative rule, applicable on listed shares, the purchase price may be calculated to 20 percent of the proceeds, after reduction for sales costs. Capital losses on listed shares may be fully offset against taxable capital gains the same year on shares, as well as on listed securities taxed as shares (however not mutual funds, (Sw. värdepappersfonder), or hedge funds, (Sw. specialfonder)

13. Tax considerations in Sweden 87

or containing Swedish receivables only, (Sw. räntefonder)). Capital losses not absorbed by these set-off rules are deductible at 70 percent in the capital income category. Should a net loss arise in the capital in- come category, a reduction is granted of the tax on income from employment and business operations, as well as national and municipal property tax. This tax reduction is 30 percent of the net loss that does not exceed SEK 100 thousand and 21 percent of any remaining net loss. A net loss cannot be carried forward to future tax years. For private individuals resident in Sweden for tax purposes, a preliminary tax of 30 per- cent is withheld on dividends.

The preliminary tax is normally withheld by Euroclear Sweden or, in respect of nominee-registered shares, by the nominee. Private individuals who own shares through investment savings account (Sw. invester- ingssparkonto) are not taxed on capital gain on sale or dividend on such shares. Consequently, losses are not deductible. Tax is levied on a standard income, based on an assessed capital value of the investment savings account multiplied with the government loan interest, regardless of whether the investment sav- ings account bears profit or loss. As of 1 January 2018, the imposed standard tax is based on a capital base multiplied by the government borrowing rate increased by 1 percentage points, however, at least 1.25 per- cent of the capital base.

Limited liability companies

For limited liability companies (Sw. aktiebolag) all income, including taxable capital gains and taxable div- idends, is taxed as income from business operations at a rate of 22 percent. Deductible capital losses on shares may only offset taxable capital gains on shares and other securities taxed as shares.

A net capital loss on shares that cannot be utilised during the year of the loss, may be carried forward (by the limited liability company that has suffered the loss) and offset taxable capital gains on shares and other securities taxed as shares in future years, without any limitation in time. If a capital loss cannot be deducted by the company that has suffered the loss, it may be deducted from group taxable capital gains on shares and other securities taxed as shares from another legal entity within the same company group, provided that the companies are entitled to tax consolidation (through so-called group contributions) and both com- panies request this for a tax year having the same income tax return filing date for each company (or, if one of the companies’ accounting liability ceases, would have had the same income tax return filing date). Special tax rules may apply to certain categories of companies or certain legal persons, e.g. investment companies.

Shareholders with limited tax liability in Sweden

For shareholders not resident in Sweden for tax purposes that receive dividends on shares in a Swedish limited liability company, Swedish withholding tax is normally withheld. The same withholding tax applies to certain other payments made by a Swedish limited liability company, such as payments as a result of re- demption of shares and repurchase of shares through an offer directed to all shareholders or all holders of shares of a certain class. The tax rate is 30 percent. The tax rate is, however, generally reduced through tax treaties for the avoidance of double taxation. In Sweden, withholding tax deductions are normally -car ried out by Euroclear Sweden or, in respect of nominee-registered shares, by the nominee.

Shareholders not resident in Sweden for tax purposes – which are not conducting business through a per- manent establishment in Sweden – are normally not liable for capital gains taxation in Sweden upon dis- posals of shares. Shareholders may, however, be subject to taxation in their state of residence. According to a special rule, private individuals not resident in Sweden for tax purposes are, however, subject to Swedish capital gains taxation upon disposals of shares in the Company, if they have been residents of Sweden or have had a habitual abode in Sweden at any time during the calendar year of disposal or the ten calendar years preceding the year of disposal. In a number of cases though, the applicability of this rule is limited by tax treaties for the avoidance of double taxation.

13. Tax considerations in Sweden 88

14. Addresses

The Company Storytel AB (publ) Box 24 167 104 51 STOCKHOLM Visiting address: Tryckerigatan 4

Legal advisor Baker & McKenzie Advokatbyrå KB Box 180 101 23 STOCKHOLM Visiting address: Vasagatan 7

Certified Adviser FNCA Sweden AB Box 5807 102 48 STOCKHOLM Visiting address: Humlegårdsgatan 5 89

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